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HERN  REGIONAL  LIBRARY  FACILIT 

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California.  Supreine  court. 

Opinion  of  the  supreme  court 
of  California  in  the  Col ton 
case , 


^ipr5;s^^^^^^g^g'"  4^"s^^    /'        »-^  .  ;^, 


"!Q  -^ 


OPINION 


OF    THE 


Supreme  Court  of  California, 


IN    THE 


COLTON  CASE. 


ARGUED     BY 

J.  A.  STANLY     AND     E.  W.  McKINSTRY, 

FOR   APPELLANT. 

CREED    HAYMOND    and    JOHN   GARBER, 

FOR     RESPONDENTS. 


June  4TH,  5TH  and  6th, 
1889. 


CROCKER  &  CO  S  PRINT.  SAN  FRANCISCO. 


m 


SAN    C.^VRI-OS     1700 


ROBERT  ERNEST  COWAN 


THE  COLTON  CASE. 


OPINION  OF  THE  SUPREME  COURT  OF  CALIFORNIA. 

[Filed  January  2,  1890.] 

COLTON,  Appellant,  ^ 

vs.  >No.  11,983. 

STANFORD  et  al.,  Respondents.      J 

Held,    affirming  the  judgment   and    order  of  the    Court 
below  : 

That  the  business  relation  which  existed  between  the 
associates,  Stanford,  Huntington,  Hopkins,  Crocker  and 
Colton,  is  much  like  a  partnership  for  the  purpose  of  organ- 
izing, controlling  and  operating  railroad  and  other  corpor- 
ations, but  in  view  of  the  manner  in  which  the  compro- 
mise impugned  was  effected  and  of  all  the  circumstances 
surrounding  the  settlement  of  the  dispute  between  plaint- 
iff and  defendants  it  is  unnecessary  to  determine  this 
question. 

That  there  was  a  relation  of  mutual  trust  and  confi- 
dence between  these  associates,  and  if  this  tr\ist  relation 
continued  to  exist  after  the  death  of  Colton  and  impose 
any  active  duties  upon  the  sur\'ivors  as  trustees  of  his  estate 
they  were  waived  by  the  plaintiff  herself,  and  the  relation 
of  trustee  and  cestui  que  trust  was  so  entirely  discarded 
and  dissolved  during  the  negotiations  that  they  were  not 


2 

bound  by  any  fiduciary  relation  to  counsel,  advise  and  pro- 
tect the  plaintiff,  or  to  perform  any  other  duty  than  to  deal 
fairly  by  her  and  in  good  faith  to  disclose  all  facts  within 
their  knowledge  material  for  her  to  know  in  conducting 
the  negotiations  fairly  and  to  enable  her  to  make  a  full 
and  unhampered  investigation  into  the  matters  in  contro- 
versy. 

That  in  all  trust  relations  the  existence  of  confidence 
will  be  presumed,  and  if  it  appear  that  any  advantage  has 
come  to  the  trustee  in  dealing  with  \\\s  cestui  qiic  irtisf^  the 
burden  will  be  thrown  upon  him  to  show  that  confidence 
was  not  in  fact  abused. 

That  this  presumption  may  be  overcome  b\-  proof  of  the 
fact  that  confidence  has  not  been  abused  and  that  the  bene- 
ficiary acted  not  upon  au)-  reliance  or  confidence  placed 
in  the  trustee  but  upon  the  advice  of  an  independent  pro- 
fessional, disinterested  and  competent  adviser. 

That  plaintiff  did  not  rest  any  confidence  or  reliance  upon 
anything  said,  done  or  omitted  to  be  said  and  done  by 
defendants  or  any  of  them,  but  called  in  and  secured  the 
aid  of  four  or  five  disinterested  and  competent  advisers,  who 
had  sources  of  information  other  than  those  possessed  by 
defendants,  and  both  plaintiff  and  her  advisers  knew, 
partly  from  discoveries  they  made  themselves  and  partly 
from  information  given  by  the  defendants  before  the  com- 
promise agreement  was  executed,  that  there  were  many 
inaccuracies  in  some  of  the  statements  furnished  to  the 
plaintiff. 

That  no  source  of  information  was  withheld  from  plaintiff" 
or  her  agents,  and  no  means  of  ascertaining  intelligently 
the  true  state  of  the  accounts  was  covered  up  before  they 
acted  upon  and  compromised  the  matters  upon  which  the 
controversy  arose;  every  fact  which  has  since  been  discov- 
ered could  have  been  discovered  before  the  execution  of  the 
agreement,  and  the  findings  show  that  defendants  in  good 
faith  disclosed  every  fact  within  their  knowledge. 


r 


— 3  — 


That,  under  such  circumstances^  the  compromise  agree- 
ment should  not  be  set  aside,  even  though  the  trustee  did 
not  impart  to  the  cestui  que  trust  all  the  knowledge  of  the 
transactions  which  he  might  have  acquired  by  diligent  and 
skillful  search. 

That  if  at  the  time  of  the  compromise  the  trustee  had 
shaken  off  his  fiduciary  character  and  the  confidence  which 
is  presumed  to  result  therefrom,  it  matters  not  what  has 
occurred  immediately  preceding  or  long  prior  to  the  final 
transaction;  or,  in  other  words,  if  the  transaction  is  one  in 
which  the  trustee  may  lawfully  deal  with  his  cestui  que 
trust  by  first  dissolving  the  trust  relation,  it  is  not  too  late 
for  him  to  do  so  at  any  time  before  the  beneficiary  is  pre- 
vented from  making  a  full  and  fair  investigation,  and  before 
he  executes  the  contract. 

That  the  fact  that  the  list  of  assets  of  the  W.  D.  Co.  fur- 
nished by  defendants  did  not  set  forth  all  the  assets  does 
not  raise  a  presumption  of  actual  or  constructive  fraud, 
ur.  where  they  believed  the  list  correct;  as  a  general  proposi- 
^  tion,  where  a  party  acting  without  belief  or  without  infor- 
>£  mation  makes  a  representation  which  is  not  true,  the  law 
c5  imputes  to  him  a  knowledge  of  its  falsity  and  makes  him 
Zj  responsible,  but  this  principle  is  without  effect  where  the 
5  representation  is  discarded  as  unworthy  of  belief,  and  inde- 
g  pendent  investigation  is  made,  as  in  this  case. 

That  the  fact  that  a  few  days  after  the  execution  of  the 
compromise  agreement,  the  W.  D.  Co.  paid  its  indebted- 
ness of  over  $3,000,000,  with  interest,  to  the  C.  P.  and 
S.  P.  with  S.  P.  bonds  at  90  cents  on  the  $1,  which  were 
represented  to  plaintiff  to  be  worth  only  60  cents,  is  not 
a  fraud  on  plaintiff  or  an  equitable  estoppel  preventing 
defendants  from  claiming  that  they  were  not  worth  90  cents 
at  the  date  of  the  compromise,  as  this  value  was  fixed  b\' 
defendants  themselves,  at  what  they  supposed  they  would 
be  worth  when  called  on  to  pay  the  C.  P.  bonds,  and  was 
merely  a  temporary  mode  of  settling  a  corporate  obliga- 


.'511784 


— 4— 

tioii;  beside,  the  values  set  opposite  the  names  of  the 
stocks,  were  not  relied  upon  in  the  compromise. 

That  the  claim  of  appellant  that  the  judgment  should 
be  reversed  on  the  twentieth  finding  is  unfounded,  as  it 
clearly  appears  from  the  evidence  that  the  compromise 
would  have  been  made  even  had  the  truth  been  known, 
and  hence,  plaintiff  cannot  complain. 

That  such  a  mistake  or  misrepresentation  would  not 
justify  setting  aside  the  agreement  especially  where  as 
here  expenditures  have  been  made  by  the  defendants  on 
the  faith  of  the  agreement  which  have  materially  enhanced 
the  value  of  the  property  in  litigation. 

That  plaintiff  sought  and  urged  the  compromise,  refusing 
to  proceed  with  the  enterprises  undertaken  and  partly  car- 
ried out;  that  the  corporations  were  heavily  indebted  and 
the  outlook  seemed  gloomy;  that  plaintiff  was  ably 
represented  in  her  negotiations  by  men  of  experience  and 
great  business  capacity,  and  the  settlement  arrived  at  was 
on  the  whole  fair  and  equitable  and  no  unconscionable 
advantage  was  taken  of  plaintiff. 


From  the  5th  day  of  October,  1874,  down  to  the  time  of 
his  death,  David  D.  Colton  was  associated  with  defendants 
in  the  ownership,  control  and  direction  of  certain  corpora- 
tions. Prior  to  that  time  defendants  and  Mark  Hopkins 
had  been  the  principal  owners  of  the  stock  of  the  Central 
Pacific  Railroad  Company,  the  Southern  Pacific  Railroad 
Company  and  of  various  other  subordinate  and  connected 
railroad  companies,  and  also  of  the  Contract  and  Finance 
Company.  They  had  associated  themselves  together  for 
the  purpose  of  securing  the  co-operation  and  assistance  of 
all  in  the  furtherance  of  certain  railroad  enterprises,  and  of 
such  others  as  they  should  from  time  to  time  agree  upon. 
In  pursuance  of  the  terms  of  their  association  and  agree- 
ment they  had  invested  respectively  large  sums  of  money, 
and  were  giving  their  time  and  labor  to  the  management 


and  direction  of  the  corporations  above-named,  and  to  the 
acquisition  and  control  of  other  corporations  which  they 
desired  to  operate  in  furtherance  of  the  general  schemes 
they  then  had  and  might  thereafter  have  in  view.  Being 
desirous  of  securing  the  aid  and  co-operation  of  another 
associate,  negotiations  were  opened  with  Mr.  Colton,  whom 
the  defendants  had  known  for  several  years  prior  thereto — 
which  ended  in  an  agreement  between  him  and  them  that 
he  should  become  associated  with  them  in  like  manner  as 
they  had  theretofore  been  associated  with  one  another.  By 
the  terms  of  this  agreement  with  the  defendants  and  Mark 
Hopkins,  Mr.  Colton  was  to  have  20,000  shares  of  the  cap- 
ital stock  of  the  C.  P.  R.  R.  Co.,  and  20,000  shares  of  the 
capital  stock  of  the  S.  P.  R.  R.  Co.,  in  consideration  of  the 
sum  of  $1,000,000,  for  which  sum  he  gave  his  promissory 
note,  with  interest  at  6  per  cent  per  annum,  payable  on  or 
before  October  5,  1879.  ^^^  dividends  on  the  stock  were 
to  be  applied  as  payments  on  the  note.  It  was  agreed  that 
Colton  was  to  share  in  the  proportion  that  his  stock  bore 
to  the  stock  issued  in  all  responsibilities,  damages,  penal- 
ties, etc.,  and  to  share  in  all  the  liabilities  of  the  C.  P.,  S. 
P.  and  Contract  and  Finance  Companies,  the  same  as  if  he 
had  been  associated  and  connected  with  them  from  the 
time  of  their  organization.  On  the  15th  of  December, 
1874,  they  organized  the  Western  Development  Company, 
the  affairs  of  which  cut  a  most  important  figure  in  the  con- 
troversy.  The  capital  stock  of  this  company  was  fixed  at 
$5,000,000,  of  which  Stanford,  Huntington,  Crocker  and 
Hopkins  each  took  two-ninths  and  Colton  one-ninth.  Gen- 
eral Colton' s  interest  in  all  other  properties  acquired  by 
the  associates  came  to  him  through  this  corporation— except 
that  which  he  held  in  the  lone  Coal  and  Iron  Company — 
which  had  a  capital  stock  of  $4,000,000,  divided  equally 
between  the  associates — and  that  which  he  held  in  the 
Colorado  Steam  Navigation  Company,  and  in  the  Occiden- 
tal and  Oriental  Steamship  Company.  He  was  also  one  of 
the  original  incorporators  of  the  S.  P.  Company  of  Arizona, 
organized  in  1878,  and  held  30,000  shares  of  the  capital 
stock  thereof. 

In  1876  the  parties  made  and  executed  a  new  agreement, 
which  they  antedated  as  of  October  5,  1874.  This  agree- 
ment differs  in  some  material    respects    from    the  original. 


A  copy  of  it  is  annexed  to  the  complaint  and  is  set  ont  in 
the  statement  of  facts.  By  the  terms  of  this  modified 
agreement  the  stock  sold  to  Mr.  Colton  was  pledged  as  col- 
lateral security  for  the  payment  of  the  $1,000,000  note, 
and  it  was  agreed  that  neither  party  should  sell  his  interest 
in  the  contract  without  the  written  consent  of  all  parties 
thereto. 

The  enterprises  entered  into  and  carried  on  by  these 
associates  during  the  life-time  of  Mr.  Colton  were  of  stu- 
pendous magnitude,  involving  face  values  amounting  to 
hundreds  of  millions  of  dollars. ,  The  success  of  their 
schemes  depended  upon  many  things.  In  the  midst  of 
their  most  important  operations  both  Mr.  Hopkins  and 
Mr.  Colton  were  taken  from  the  association  by  death,  the 
former  on- March  29,  1878,  the  latter  in  October  following. 
The  bond  'of  friendship  which  had  bound  the  five  associates 
together  was  of  the  strongest  kind,  and  the  confidence 
which  one  reposed  in  another  had  no  limit. 

Soon  after  the  death  of  her  husband,  Mrs.  Colton — this 
plaintiff — began  to  make  inquiries  as  to  the  interest  of  the 
estate  in  the  various  corporations  with  which  Mr.  Colton 
had  been  connected.  In  his  last  will  and  testament  Mr. 
Colton  had  recommended  that  if  his  wife  should  desire  the 
a.ssistance  of  any  one  in  the  settlement  of  his  estate,  his 
friend,  S.  M.  Wil.son,  and  his  .secretary,  Charles  E.  Green, 
should  be  called  in  as  co-executors.  Mrs.  Colton  being 
the  universal  legatee,  and  entirely  ignorant  of  her  hus- 
band's affairs,  called  upon  and  secured  the  services  of  Mr. 
Wilson  to  aid  her.  Negotiations  were  entered  into  between 
])laintiff  and  defendants  for  a  .settlement.  During  these 
negotiations  the  plaintiff  became  suspicious  of  the  motives 
and  conduct  of  the  defendants,  believed  that  they  had 
manipulated  the  books  to  deceive  her,  and  that  they  were 
unworthy  of  trust  or  confidence.  Nevertheless,  after  a 
tliorough  examination  of  the  books  and  many  interviews 
with  defendants,  a  compromise  agreement  was  entered  into 
on  the  27th  day  of  August,  1879,  by  the  terms  of  which 
certain  stock.s,  including  408  .shares  of  the  Rocky  Mount- 
ain Coal  and  Iron  Company,  were  assigned  to  defendants, 
the  $1,000,000  note  was  cancelled,  and  all  the  liabilities  of 
the  W.  D.  Co.,  and  other  corporations,  were  a.ssumed  by 
them  and  the  estate  of  Colton  was  released  therefrom. 


About  two  years  after  the  execution  of  the  compromise 
agreement  plaintiff  discovered  many  errors  in  the  calcula- 
tions upon  which  the  compromise  had  been  made.  She 
thereupon  served  a  notice  of  rescission  and  demanded  a 
new  accounting-.  A  complaint  was  drawn  up  charging  the 
defendants  with  misrepresentation,  concealment,  etc.,  and 
after  several  interviews,  to-wit,  on  May  24,  1882,  plaintiff 
commenced  this  action  for  a  rescission  of  the  compromise 
agreement  of  August  27,  1879,  (referred  to  as  "Exhibit 
F"),  on  the  ground  that  said  agreement  had  been  procured 
through  false  and  fraudulent  representations  made  by 
defendants  during  the  course  of  the  negotiations  which 
resulted  in  the  execution  of  the  compromise. 

The  answer  denies  the  charges  of  fraud,  alleges  that 
whatever  statements  were  made  by  defendants  were  made 
by  them  in  good  faith,  believing  them  to  be  true,  and  avers 
that  Colton,  during  the  time  that  he  was  connected  with 
the  W.  D.  Co.,  fraudulently  appropriated  to  his  own  use 
certain  large  sums  of  money  belonging  to  said  company 
and  to  these  defendants. 

After  a  trial,  lasting  nearly  two  years,  before  Hon.  Jack- 
son Temple — who  was  at  that  time  Judge  of  the  Superior 
Court  of  Sonoma  county,  and  who  has  recently  left  this 
Court  on  account  of  illness — findings  and  judgment  were 
rendered  in  favor  of  defendants.  From  this  judgment,  and 
an  order  denying  the  motion  for  a  new  trial,  the  plaintiff 
has  appealed. 

Although  the  record  herein  covers  about  12,000  pages  of 
printed  matter  there  is  no  substantial  conflict  in  the  evi- 
dence. The  questions  involved  in  this  appeal  have  been 
debated  by  counsel  upon  the  assumption  that  the  Jhc/s  found 
by  the  learned  Judge  of  the  court  below  are  unassailable, 
and  that  the  decision  is  correct,  except  as  to  the  legal 
deductions  drawn  from  the  specific  facts  found. 

It  is  not  contended  by  the  appellant  that  the  defendants 
knowingly  made  any  false  statements  or  uitoided  to  de- 
ceive plaintiff  in  the  negotiations,  but  it  is  claimed  that 
the  facts  found  show  the  existence  of  a  fiduciary  relation 
between  plaintiff  and  defendants;  that  in  dealing  with 
plaintiff"  it  was  the  duty  of  the  defendants  to  make  a  full 
and  correct  disclosure  of  the  condition  of  the  business  in 
which  Colton  held  an   interest,  whether  the  plaintiff  was 


— 8— 

relying  upon  their  advice  or  upon  her  own  investigation, 
and  the  advice  and  judgment  of  Wilson  and  other  friends; 
that  it  is  immaterial  whether  the  parties  believed  there  was 
in  fact  any  such  duty  resting  upon  the  defendants,  or 
whether  the  plaintiff  did  actually  rely  upon  and  confide  in 
them;  that  where  the  negotiations  begin  in  peace  and  con- 
fidence between  trustee  and  cestui  que  trusty  it  matters 
not  that  suspicion,  distrust  and  fears  may  lead  the  bene- 
ficiary to  make  independent  investigation  during  the  ne- 
gotiations, and  rely  upon  independent  advice,  and  her  own 
judgment,  in  finally  concluding  the  compromise;  that  the 
trustee  can  shake  off  the  duty  referred  to,  if  at  all,  only 
b}'  a  clear  and  unequivocal  dissolution  of  the  trust  relation 
before  the  negotiations  commence;  that  the  business  rela- 
tion between  Colton  and  defendants  was  a  partnership, 
and  that  the  surviving  partners  were  bound  to  know  the 
condition  of  the  business,  and  impart  full  information 
thereof  to  plaintiff;  that  in  cases  of  this  kind  the  surviv- 
ing partners  must  show  affirmatively  that  the  settlement 
was  fair  and  the  consideration  adequate,  the  contract  being 
prima  facie  void;  that  the  Court  erred  in  ignoring  this 
principle,  and  in  holding  that  it  was  for  plaintiff  to  prove 
fraud;  that  the  findings  show  both  actual  and  constructive 
fraud  and  threats,  and  that  the  representions  made  by  de- 
fendants with  respect  to  the  ownership  of  the  408  shares 
of  Rocky  Mountain  Coal  and  Iron  Company  stock  are 
sufficient  of  themselves  to  call  for  a  reversal  of  the  judg- 
ment; that  the  judgment  should  be  reversed  and  a  judg- 
ment entered  in  favor  of  the  plaintiff  on  account  of  undue 
influence,  concealment  and  fraudulent  misrepresentations, 
although  it  be  conceded  that  the  parties  making  the  con- 
tract herein  sought  to  be  rescinded  dealt  as  strangers,  and 
that  the  findings  do  not  cover  the  material  issues;  and  that 
the  Court  erred  in  its  conclusions  of  law,  and  as  to  the 
effect  of  certain  evidence. 

Many  of  the  topics  discussed  by  counsel  are  involved  in 
the  question  whether  there  existed  such  a  fiduciary  rela- 
tion as  called  for  a  full,  fair  and  accurate  statement  by 
defendants  of  the  condition  of  the  affairs  of  the  several 
corporations  in  which  Mr.  Colton,  in  his  lifetime,  had  been 
interested;  counsel  for  appellant  contended  all  the  time 
that  such  relation  did  exist,  and  that  by  virtue  of  their  su- 


perior  knowledge  and  means  of  information,  the  duty  of 
making  a  full  disclosure  and  truthful  statement  by  defend- 
ants became  imperative  and  absolutely  essential  to  the  val- 
idity of  any  compromise,  based  upon  negotiations  between 
the  parties.  The  respondents  have  claimed  at  all  stages 
of  the  litigation  that  the  business  relation  of  the  several 
associates  was  not  that  of  partners,  and  that  upon  the 
death  of  Mr.  Colton  the  defendants  owed  plaintiff  no  duty 
other  than  that  which  arises  from  the  relation  of  stock- 
holders in  a  corporation.  In  this  branch  of  the  contro- 
versy the  learned  Judge  of  the  Court  below  sided  with  the 
respondents,  and  upon  this  subject  he  expressed  his  opin- 
ion in  the  following  language  :  "At  no  time  were  the  de- 
fendants, Leland  Stanford,  C.  P.  Huntington,  Charles 
Crocker  and  jMark  Hopkins,  copartners,  or  associated  in 
any  business  or  enterprise  as  copartners.  Nor  did  they  at  any 
time  carry  on  any  business  as  copartners,"  etc.  (Finding  3). 
"xA.t  the  death  of  Colton  the  association  between  him  and 
the  defendants  and  Mark  Hopkins  entirely  ended  and 
ceased.  There  was  no  property  belonging  to  the  associ- 
ates, as  such.  After  his  death  the  plaintiff  was  merely 
a  stockholder  in  the  various  corporations.  *  ^         ■^' 

After  the  death  of  Colton  the  individual  defendants  had  no 
other  power  over  the  affairs  of  the  plaintiff  and  occupied 
toward  her  no  other  relationship  than  as  controlling  the 
corporations  in  which  she  was  a  stockholder,  and  as  creditor 
and  pledgees."  (Finding  22).  "But  if  a  trust  relation 
of  this  character  existed  between  these  associates,  what 
was  the  relation  of  the  survivors,  upon  the  death  of  Colton, 
to  his  representative?  At  his  death  the  association  was 
entirely  ended.  It  was  a  case  where  confidence  was  given 
for  confidence,  service  for  service.  There  was  no  prop- 
erty belonging  to  the  associates,  as  such.  No  power  over 
the  affairs  of  Mrs.  Colton  or  the  estate  of  D.  D.  Colton, 
survived  his  death.  His  position  was  one  of  great  power 
over  many  things,  through  this  mutual  confidence.  She 
was  merely  a  stockholder  in  various  corporations.  It  is 
true  they  continued  to  be  virtual  directors  of  these  cor- 
porations, as  they  and  Colton  had  previously  been.  But 
this  no  longer  depended  upon  any  confidential  relations 
with  the  holders  of  Colton' s  stock.  *  *  * 

The  previous  relations  with  Colton  did  not  affect  the  ques- 


-lo- 


tion. They  and  Colton  had  no  vested  interests  in  any  new- 
projects  not  )et  begun.  *  *  *  There  was  not 
then,  after  Colton' s  death,  any  further  active  duties,  as 
trustees,  due  from  defendants  to  the  estate  of  Colton."  (8 
W.  C.  Rep.,  Supplement,  p.  31). 

It  must  be  admitted,  however,  that  the  arguments  of  the 
appellant  upon  this  question  are  most  persuasive,  and  make 
the  business  relation  which  existed  between  the  associates 
look  like  a  partnership  for  the  purpose  of  organizing,  con- 
trolling and  operating  railroad  and  other  corporations  ;  but 
in  view  of  the  manner  in  which  the  compromise  was  effect- 
ed, and  of  all  the  circumstances  surrounding  the  settle- 
ment of  the  dispute,  we  deem  it  unnecessary  to  determine 
this  particular  question.  There  is  no  doubt  that  the  asso- 
ciates occupied  toward  one  another  relations  of  the  great- 
est confidence  and  trust.  This  relation  of  trust  and  confi- 
dence, indeed,  was  one  of  extraordinary  character,  greater 
than  ever  existed  in  any  partnership  with  wdiich  we  have 
been  acquainted.  The  power  and  authorit)-  possessed  by 
each  associate  over  the  business,  property  and  standing  of 
others  interested  with  him  never  was  possessed, perhaps,  by 
a  member  of  any  other  concern  or  a.s.sociation.  That  there 
was  a  relation  of  mutual  trust  and  confidence  of  high  char- 
acter between  the  associates,  and  that  such  relation  was 
recognized  by  Judge  Temple,  is  apparent  from  the  follow- 
ing extracts  taken  from  his  findings  and  opinion  :  "Some 
of  their  transactions  in  the  payment  and  disbursement  of 
money  were  private  and  confidential  between  .said  associ- 
ates, the  character  and  rea.son  of  such  disbursements  being 
known  only  to  and  by  said  associates,  and  not  recorded  or 
entered  in  any  books  or  writings  kept  by  them,  or  any  of 
said  corporations,  and  said  five  associates  until  the  death 
of  said  Hopkins,  and  .said  four  associates  thereafter,  until 
the  death  of  said  Colton,  had  and  assumed  and  sustained 
relations  of  intimate  and  peculiar  trust  and  confidence, 
each  toward  and  with  the  others,  in  regard  to  their  said 
enterpri.ses  and  their  management  and  conduct  ;  and  they 
accpiired,  obtained  and  had  confidential  information  and 
control  each  concerning  and  over  the  affairs  of  the  property 
and  business  connected  with,  growing  out  of  and  accumu- 
lated !)}•  and  through  the  enterprises  in  which  said  Stan- 
ford, Huntington,  Hopkins,  Crocker  and  Colton  wxne  a.sso- 


—11— 

ciated  together.  As  each  new  scheme  was  determined  upon 
each  had  his  part  in  the  work,  though  each  party  then 
decided  for  himself  whether  he  would  go  into  each  scheme 
or  not,  and  there  was  no  power  in  the  majorit\-  to  commit 
any  one  to  any  new  enterprise  until  he  approved  of  it." 
(Finding  13.)  "Fiduciary  relations  may  exist  between 
stockholders  of  various  corporations,  who  have  associated 
themselves  to  control  such  corporations  and  make  them 
work  in  harmony  ;  but  they  would  not  be  partners.  And 
so  I  conclude,  although  the  corporations  managed  by  these 
associates  cannot  be  regarded  as  partnerships,  nor  as  mere 
instrumentalities  of  a  partnership,  the  relation  between  the 
parties  was  nevertheless  of  a  fiduciary  character.  I  think 
it  already  appears  that  the  parties  to  the  agreement,  "Ex- 
hibit A,"  intended  something  more  than  to  procure  situa- 
tions for  each  other  as  employes  in  various  corporations. 
They  had  designs  not  stated  in  that  paper,  which  were  the 
real  purposes  of  that  association.  The  fiduciary  relation 
must  have  existed  under  our  Code  as  to  these  projected 
enterprises,  and  the  management  of  the  system  of  roads 
they  had  built  and  acquired.  ''''  *  ^^  Each  had  invest- 
ed his  money  and  expended  his  labor  in  reliance  upon  this 
fidelity  of  the  others.      (Page  30,  Supplement.) 

It  is  a  nice  question  whether  the  trust  relation  which  had 
existed  between  the  associates,  continued  to  exist  after  the 
death  of  Colton,  and  imposed  any  active  duties  upon  the 
survivors  as  trustees  of  his  estate;  but,  if  any  such  duties 
were  cast  upon  the  defendants  b}-  reason  of  the  death 
of  Mr.  Colton,  they  were  waived  by  the  plaintiff  herself, 
and  the  relation  of  trustee  and  cestui  que  trust  was  .so  en- 
tirely discarded  and  dissolved  during  the  negotiations  that 
they  were  not  bound  by  any  fiduciary  relation  to  counsel, 
advi.se  and  protect  the  plaintiff,  or  to  perform  any  other 
duty  than  to  deal  fairly  by  her,  and  in  good  faith  to  dis- 
close all  facts  within  their  knowledge  material  for  her  to 
know  in  conducting  the  negotiations  fairly,  and  to  enable 
her  to  make  a  full  and  unhampered  investigation  into  the 
matters  in  controversy. 

We  have  been  unable  to  find  a  case  in  which  a  lump 
agreement  of  compromise,  entered  into  b\- survi\"ing  part- 
ners and  the  representative  of  a  deceased  partner,  or  by  a 
trustee  and  cestui  que  trust — the  latter  acting  by  the  advice 


■12- 


of  experts  and  able  counsel,  and  renouncing  all  confidence 
in  the  trustees — after  full,  fair  and  honest  investigation, 
has  been  rescinded  because  of  actual  and  unintentional  in- 
accuracies discovered  subsequent  to  the  execution  of  the 
agreement;  nor  do  we  know  of  any  universal  rule  of  equity, 
or  any  provision  of  our  Code,  tending  to  establish  the  prop- 
osition that  from  the  mere  fact  of  a  prior  existing  fiduciary 
relationship  everything  in  the  absence  of  proof  must  be 
presumed  against  the  trustee  who  has  entered  into  a  con- 
tract with  his  cestui  que  trusty  regardless  of  the  question 
whether  confidence  has,  in  fact,  been  reposed  and  abused. 
Of  course  in  all  trust  relations  the  existence  of  confidence 
will  be  presumed,  and  if  it  appear  that  any  advantage  has 
come  to  the  trustee  in  dealing  with  his  cestui  que  trusty  the 
burden  will  be  thrown  upon  him  to  show  that  confidence 
was  not  in  fact  abused.  But  it  has  always  been  held,  as 
we  understand  it,  that  this  presumption  might  be  overcome 
by  proof  of  the  fact  that  confidence  had  not  been  abused, 
and  that  the  beneficiary  acted,  not  upon  any  reliance  or  confi- 
dence placed  in  the  trustee,  but  upon  the  advice  of  an  in- 
dependent, professional,  disinterested  and  competent  advi- 
ser. There  is  a  distinction  to  be  made  between  transactions 
occurring  directly  between  the  trustee  and  his  beneficiary, 
and  those  transactions  in  which  the  trustee  deals  with 
himself  or  another  party.  Thus,  if  a  trustee  in  the  execu- 
tion of  his  trust  sells  property  to  himself,  the  transaction 
may  be  set  aside  by  the  cestui  que  trust  as  void,  without 
giving  any  reason  or  alleging  any  fraud,  or  any  disadvan- 
tage or  inadequacy  of  price.  In  such  case  there  are  no  two 
parties  to  the  contract,  the  trustee  dealing  witli  himself 
alone,  but  where  the  tru.stee  deals  directly  with  the  cestui 
que  trust  the  latter  having  for  himself  an  independent  ad- 
viser, and  the  trustee  making  no  pretense  of  advising  him, 
the  tran.saction  is  not  voidable  at  the  election  of  the  bene- 
ficiary, but  it  will  devolve  upon  the  latter,  if  he  would  .set 
it  aside,  to  show  some  reason  therefor.  He  must  show 
either  actual  or  constructive  fraud.  Of  course  the  fraud 
may  be  .shown  in  .some  in.stances  by  presumptions. 

Section  2,219  of  the  Civil  Code  provides  :  "  Kvery  one 
who  voluntarily  assumes  a  relation  of  personal  confidence 
with  another  is  deemed  a  trustee,  within  the  meaning  of 
this  chapter,  not  only  as  to  the    person    who    reposes  such 


—13— 

confidence,  but  also  as  to  all  persons  of  whose  affairs  he 
thus  acquires  information  which  was  given  to  such  person 
in  the  like  confidence,  or  over  whose  affairs  he,  by  such 
confidence,  obtains  any  control."  Section  2,228  is  as  fol- 
lows :  ".  In  all  matters  connected  with  his  trust,  a  trustee 
is  bound  to  act  in  the  highest  good  faith  toward  his  bene- 
ficiary, and  may  not  obtain  any  advantage  therein  over  the 
latter  by  the  slightest  misrepresentation,  concealment, 
threat,  or  adv^erse  pressure  of  any  kind."  Section  2,229  ^^ 
as  follows  ;  "A  trustee  may  not  use  or  deal  with  the  trust 
property  for  his  own  profit,  or  for  any  other  purpose  uncon- 
nected with  the  trust,  in  any  manner."  Section  2,235  is 
as  follows  :  "  All  transactions  between  a  trustee  and  his 
beneficiary  during  the  existence  of  the  trust,  or  while  the 
influence  acquired  by  the  trustee  remains,  by  which  he  ob- 
tains any  advantage  from  his  beneficiary,  are  presumed  to 
be  entered  into  by  the  latter  without  sufficient  considera- 
tion, and  under   undue  influence." 

That  these  provisions  are  consistent  with  the  rules  of 
equity,  as  w^e  have  construed  them,  is  apparent,  we  think, 
when  read  in  connection  with  the  following  provision  : 
"The  person  whose  confidence  creates  a  trust  is  called  the 
trustor;  the  person  /;/  u'honi  confidence  U  reposed  is  called 
the  trustee;  and  the  person  for  whose  benefit  the  trust  is  cre- 
ated is  call  the  beneficiary."  (C.  C,  Sec.  2,218.)  These 
provisions  show  that  the  fundamental  principle  of  the  rela- 
tion of  trustee  and  cestui  que  trust  is  that  of  confidence. 

In  the  case  at  bar  Mrs.  Colton  not  only  did  not  rest  anv 
confidence  or  reliance  upon  anything  said,  done,  or  omitted 
to  be  said  and  done  by  the  defendants,  or  any  of  them,  but 
she  called  in  and  secured  the  aid  of  four  or  five  disinterested 
and  competent  advisers;  among  these  was  vS.  M.  Wilson, 
one  of  the  leaders  of  the  bar  of  this  State,  a  man  of  irre- 
proachable character,  in  the  prime  of  life,  for  twenty-five 
years  the  warm,  personal  friend  of  her  husband,  and  the 
man  whom  he  had  recommended  on  his  death-bed,  and 
she  was  fully  informed  by  him  as  to  her  legal  rights.  She 
also  obtained  the  services  of  Mr.  Lloyd  Tevis,  a  skillful 
and  successful  financier,  to  assist  Mr.  Wilson  in  his  in\-esti- 
gations  as  to  the  business  of  the  corporations.  The  in- 
vestigations made  by  these  gentlemen  and  the  plaintiff' 
lasted  for  over  six  months,  and  were  most  thorough,  care- 


—14- 


fiil  and  diligent.  It  is  found,  as  a  matter  of  fact,  that  they 
had  sources  of  information  other  than  those  possessed  by 
the  defendants,  and  that  they  were,  in  fact,  more  tlior- 
oughly  acquainted  with,  and  better  qualified  to  form  an 
accurate  judgment  as  to  the  condition  of  the  affairs  of  the 
company  than  any  of  the  defendants.  Mrs.  Colton  had  also 
the  advice  of  Mr.  Steinberger,  an  old  friend  of  her  hus- 
band, and  the  advice  and  assistance  of  Mr.  Green,  his 
Secretary  for  many  years,  and  of  Mr.  Douty,  who  was  a 
cousin  and  intimate  friend  of  General  Colton,  and  a  busi- 
ness man  of  great  capacity  and  experience,  and  a  skillful 
and  expert  accountant.  All  the  claims  preferred  by  the 
defendants  on  their  own  behalf  were  fully  discussed,  con- 
sidered and  investigated.  The  subject-matters  of  the  ne- 
gotiations were  of  the  most  complicated  nature,  con.sisting 
in  part  of  accounts  running  through  many  years  and  re- 
corded in  many  volumes  of  books  and  thousands  of  vouchers 
and  papers  relating  in  part  to  the  transactions,  some  of 
which  had  gone  out  of  the  niemor}-  of  the  parties  thereto. 
The  Court  found  as  a  fact,  and  it  seems  practically  undis- 
'puted,  that  during  the  negotiations  defendants  were  ready 
and  willing  to  answer,  and  did  truthfully  answer,  all  ques- 
tions asked  them  and  .submitted  freely  all  the  books  and 
accounts  in  their  pos.se.ssion,  or  under  their  control,  to  the 
inspection  and  investigation  of  the  plaintiff  and  her  agents. 
The  plaintiff  and  her  agents  knew,  partly  from  discoveries 
they  made  themselves,  and  partly  from  information  given 
by  the  defendants  before  the  compromise  agreement  was 
executed,  that  there  were  many  inaccuracies  in  some  of 
the  statements  furnished  to  the  plaintiff.  Among  other 
important  matters  in  dispute  between  the  parties,  and 
which  were  com])romised,  was  the  right  to  Western  Develop- 
ment Company  dividends,  amounting,  according  to  plaint- 
iff's  valuation,  to  over  half  a  million  dollars.  At  the  time 
the  negotiations  were  in  ])rogress  the  plaintiff  saw  no 
justice  whatever  in  the  transaction;  her  heart  rebelled 
against  the  whole  matter.  She  believed  that  the  defend- 
ants were  unworthy  of  any  credit  or  confidence,  and  were 
endeavoring  by  all  the  means  in  their  power  to  cheat  and 
defraud  her.  She  suspected  that  the  defendants  had  made 
some  of  the  charges  against  her  husband,  knowing  them 
to   be   false,   and    that   they   had   manipulated  their  books 


—15— 

to  sustain  those  charges.  No  source  of  information  was 
withheld  from  them ;  no  means  of  ascertaining  intelligently 
the  true  state  of  the  accounts  were  covered  up  before  they 
acted  upon  and  compromised  the  matters  upon  which  the 
controversy  arose  ;  every  fact  which  has  since  been  dis- 
covered could  have  been  discovered  before  the  execu- 
tion of  the  compromise  agreement,  as  well  as  thereafter;  the 
witnesses  who  could  throw  any  light  upon  the  matters 
in  controversy  were  within  their  reach.  Mrs.  Colton 
was  most  anxious  to  make  the  settlement.  The  defend- 
ants "insisted  that  they  were  not  bound  to  discount 
the  future  of  their  securities  for  her,  thus  giving  her 
the  benefit  of  their  contemplated  enterprises  and  the  ex- 
penditure of  more  millions.  She  was  not  entitled  to  the 
profits  when  she  would  not  share  the  risks."  The  property 
in  controversy  was  of  immense  value — chiefl\'  speculative 
value.  Mr.  Tevis  "was  known  as  a  bold,  enterprising 
and  successful  speculator.  He  was  intimately  acquainted 
with  the  railroads  and  was  a  man  of  great  wealth,  abun- 
dantly able  to  pick  up  the  burden  where  Colton  had  drop- 
ped it  and  carry  it  along  without  asking  any  favors  from 
the  defendants,"  all  of  which  was  known  to  the  plaintiff 
at  the  time  she  acted  upon  his  advice  and  accepted  the 
terms  of  the  compromise.  (Findings  i8,  55,  57;  Supple- 
ment p.  67). 

The  findings  show  that  the  defendants  in  good  faith  dis- 
closed every  fact  within  their  knowledge.  There  is  noth- 
ing in  the  findings  to  show  that  plaintiff  or  her  agents  were 
misled  as  to  any  matter  except  the  statement  in  regard  to 
the  number  of  shares  of  the  Rocky  Mountain  Coal  and  Iron 
Company  stock,  which  they  claimed  to  own,  though  held 
by  Mr.  Colton.     Of  this  matter  we  shall  speak   hereafter. 

Here,  therefore,  we  have  a  case  in  which — assuming  the 
existence  of  a  fiduciary  relation  and  that  the  presumptions 
as  to  confidence  and  the  burden  as  to  proof  are  as  claimed 
by  appellant — the  undisputed  facts  show  that  there  was 
absolutely  no  confidence  reposed  by  the  beneficiary,  but 
that  she  acted  exclusively  upon  the  advice  of  several  dis- 
interested experts  and  professional  friends,  specially 
selected  to  investigate  and  counsel  her,  because  of  their 
ability  and  familiarity  with  the  affairs  of  the  trustees  with 
whom  she  was  dtaling,  and  who  acted  toward  her  in  the 
highest  good  faith. 


—16- 


To  hold  that  under  sitc/i  ciraniistancesa.  contract,  entered 
into  by  the  parties  compromising  and  settling  dispntes  of 
the  most  doubtful  character  and  value  cannot  stand,  if  it 
subsequently  appear  that  the  trustee  did  not  impart  to  the 
ccshii  (/lie  trust  not  only  all  the  knowledge  of  the  transac- 
tions of  which  he  was  possessed,  but  all  that  he  might  have 
acquired  by  diligent  and  skillful  search,  would  be  to  place 
an  absolute  embargo  upon  all  settlements  of  disputed 
questions  between  parties  holding  trust  relations,  although 
equity  favors  the  amicable  adjustment  of  claims  which,  like 
those  involved  in  this  settlement,  bid  fair  to  become  a 
fruitful  source  of  litigation.  Under  such  a  rule  it  would 
be  difficult  to  find  men  fit  to  be  trustees  who  would  accept 
such  a  trust;  there  would  be  no  inducement  to  compro- 
mise doubtful  matters,  however  advantageous  the  settle- 
ment might  seem  to  be  to  the  cestui  que  trust,  and  no 
trustee,  or  his  sureties,  who  had  settled  with  his  cestui  que 
trust  would  feel  secure  in  his  position  until  either  time  or 
circumstances  had  dispelled  every  possible  chance  of  a  suc- 
cessful contest,  based  upon  new  evidence  or  a  rise  in  val- 
ues. Such  a  construction  of  the  provisions  of  our  code 
would  not  only  place  them  in  antagonism  to  all  the  author- 
ities which  have  explained  and  applied  the  rules  of  equity 
governing  such  contracts  between  trustee  and  cestui  que 
trust — and  the  code  provisions  are  but  a  digest  of  these 
rules — but  would  convert  a  rule  intended  to  prevent  fraud 
into  one  creating  an  incentive  to,  and  a  cover  of,  fraud; 
because  it  would  afford  a  convenient  method  for  a  party 
who  had  repudiated  any  reliance  upon  or  trust  in  his  trus- 
tee, and  who  had  acted  upon  the  advice  of  independent, 
skilled  and  di.sinterested  champions  and  his  own  investi- 
gations, to  turn  around  when  subsequent  facts  showed  that 
the  bargain  was  to  his  disadvantage  and  say  in  effect:  "It 
is  true  I  did  not  place  any  confidence  in  your  statements, 
and  told  you  that  I  should  not,  but  should  rely  on  my 
trusted  agents.  It  is  true  I  acted  only  in  my  own  inter- 
est, being  sole  legatee.  It  is  true  you  laid  before  me  all 
the  means  of  information,  and  I  and  my  agents  assumed 
to  act  upon  them.  We  had  the  means  of  information,  and 
might  have  discovered  the  truth,  but  we  were  not  fully 
informed.  It  is  sufficient  to  sa)'  \\\dX  you  did  not  correctly 
represent  the  condition  of  the  bu.siness.     It  was  your  duty 


—17— 

to  do  so.  I  admit  that  you  acted  honestly  and  fairly;  that 
yon  did  not  intend  to  misrepresent  any  fact,  or  any  value, 
and  I  admit  that  my  means  of  information  were  as  good  as 
yours  were.  It  matters  not  that  I  gave  you  notice  in 
advance,  I  should  not  trust  you  in  anything  you  said  or 
did,  but  should  rely  upon  the  investigations  and  advice  of  my 
friends,  because  your  representations  were  not  correct.  It 
was  your  duty  to  make  them  full,  fair  and  accurate.  I 
claim  a  rescission  upon  the  representations  you  made, 
althouo;h  I  did  not  believe  them."  If  there  is  a  case  in 
which  a  court  of  equity  has  decreed  a  rescission  under  such 
circumstances,  it  has  not  been  called  to  our  attention. 
Whatever  may  have  been  said  as  to  the  presumptions  aris- 
ing out  of  proof  of  a  fiduciary  relation,  the  fundamental 
principle  upon  which  rescission  is  granted  is  always,  and 
under  all  circumstances,  the  claim  and  consideration  that 
confidence  has  been  reposed  and  that  confidence  has  been 
abnsed.  No  such  claim  can  in  reason  be  made  where  the 
party  seeking  the  rescission — being  of  competent  age  and 
understanding,  and  acting  only  in  his  own  interest — has 
undertaken  to  investigate  for  himself,  called  in  experts, 
been  given  free  and  fair  means  of  ascertaining  the  truth, 
acted  upon  his  own  judgment  and  the  advice  of  friends, 
and  repudiated  any  confidence  in  or  reliance  upon  the  par- 
ties with  whom  he  was  dealing.  It  matters  not  what  the 
relations  of  the  parties  have  been  prior  to,  or  at  the  time  of 
the  negotiations  for  a  settlement  and  compromise  of  their 
disputes,  the  principle  is  one  of  universal  application,  and 
it  is  a  principle  of  common  sense  and  of  good  policy. 

It  is  unnecessary  for  us  to  review  the  authorities  on  this 
subject.  They  will  be  found,  we  think,  to  fully  support 
the  views  we  have  expressed,  and,  in  order  to  make  as 
brief  as  possible  this  opinion,  which,  perhaps,  is  already 
unnecessarily  extended  on  this  question,  we  simply  cite 
some  of  the  cases  without  commenting  upon  the  peculiar 
features  of  any  of  them.  We  have  examined  the  cases 
cited  by  appellant,  and  find  nothing  in  them  which  con- 
flicts with  what  is  said  herein.  (Kimball  vs.  Liucoln,  99 
111.,  578;  Gage  vs.  Parmalee,  87  Id.,  330;  Casey  vs.  Casey, 
14  Id.,  113;  Farnum  vs.  Brooks,  9  Pick.,  213;  Knight  vs. 
Majoribanks,  11  Beavan,  324;  Morse  vs.  Royal,  12  Vesey; 
Hunter  vs.  Atkyns,  3  Mylne   and    K.;  Hagar  vs.  Thomp- 


-l.s- 


son,  I  Black,  80;  Cartriolit  vs.  Kurnes,  2  INIcCrary,  532; 
(iedde's  Appeal,  80  Pa.  St.,  460;  White  vs.  Walker,  5 
Fla. ,  478;  Hall  vs.  Johnson,  41  Mich.,  289;  Bowman  vs. 
Carithers,  40  Ind.,  90;  Turner  vs.  Otis,  30  Kan.,  i;  ]\Iur- 
ray  vs.  Elston,  24  N.  J.  Eq.,  310;  Korn  vs.  Becker,  40  Id., 
408;  De  Montmorency  vs.  Devereaux,  7  Clark  &  Finnelh, 
188;  Hough  vs.  Richardson,  3  Story,  690;  Loesser  vs. 
Loesser,  81  K).,  139;  Motley  vs.  Motley,  45  Ala.,  558; 
Kissling  vs.  Shaw,  2,t,  Cal.,  425.) 

It  is  claimed,  however,  that  the  trustee  cannot,  after 
negotiations  are  begun  between  himself  and  his  cestui  que 
iriist^  dissolve  the  trust  relation  "  and  place  the  parties  at 
arm's  length,"  and  that  "  the  rights  of  these  parties  and 
the  rules  by  which  they  are  to  be  investigated  should  be 
determined  by  the  relation  of  the  parties  zvhen  their  nego- 
tiations coniDieticed.''''  We  see  no  reason  for  such  distinc- 
tion. Sugden's  definition  of  the  rule  applicable  in  such 
cases  is  expressed  in  the  following  language:  "It  must 
not  be  understood  that  a  trustee  cannot  buy  from  his  cestui 
que  trust  where  he  is  sui generis;  the  rule  is  that  he  can- 
not buy  from  himself.  If  the  cestui  que  trust  clearly 
discharges  the  trustee  from  the  trust,  and  considers  him 
as  an  indifferent  person,  he  may  purchase;  but  it  must 
clearh'  appear  that  the  purchaser  at  the  ti)ne  of  the  pur- 
chase had  shaken  off  his  confidential  character  by  the 
consent  of  the  cestui  que  trusty  freely  given  after  full 
information  and  bargaining  for  the  right  to  purchase." 
(2  Sugden  on  \'endors,  417,  bottom  paging  693.)  There 
is  nothing  in  this  text,  or  any  decision  we  have  seen, 
requiring  a  contract  preceding  the  contract  to  purchase,  or 
compromise,  giving  the  trustee  permission  to  purchase  as 
a  basis  for  a  second  contract  in  which  the  terms  of  the 
sale,  or  compromise,  may  be  lawfully  agreed  to.  If  at  the 
ti^ne  of  the  purchase^  or  compromise,  the  trustee  has  shaken 
off  his  fiduciary  character,  and  the  confidence  which  is 
presumed  to  result  therefrom,  it  matters  not  what  has 
occurred  immediately  preceding  or  long  prior  to  the  final 
transaction.  In  other  words,  if  the  tran.saction  is  one  in 
which  the  trustee  may  lawfully  deal  with  his  cestui  que 
trust  by  first  dissolving  the  trust  relation,  it  is  not  too  late 
for  him  to  do  so  at  any  time   before   the  cestui  que  trust  is 


—19— 

prevented  from  making  a  full  and  fair  investigation  and 
consideration  of  the  business  in  hand,  and  before  he  exe- 
cutes the  contract. 

Other  points  discussed  at  the  bar  are  involved  in  the 
question  whether  plaintiff  was  induced  by  fraud,  actual  or 
constructive,  to  enter  into  the  compromise  agreement — 
whether  there  were  false  representations,  concealments, 
threats  or  any  unconscionable  advantages  gained  b}-  de- 
fendants through  their  superior  opportunities   and  power. 

Upon  ever}'  material  issue  of  fact  the  Court  below  found 
in  favor  of  defendants,  except  as  to  a  part  of  the  408 
shares  of  Rocky  Mountain  Coal  and  Iron  Company  stock, 
and  its  finding  of  fact  upon  that  issue  was,  in  the  opinion 
of  the  Court,  insufficient,  in  view  of  other  findings  to 
support  a  decree  of  rescission. 

Since  it  is  claimed,  however,  that  the  specific  facts  found 
do  show  fraud,  concealments  and  undue  advantage,  not- 
withstanding the  general  findings  of  the  Court,  which 
negative  the  charges  thereof,  it  becomes  necessar\-  to  look 
into  the  circumstances  under  which  the  compromise  was 
effected. 

So  far  as  the  exhibits  of  the  condition  of  the  W.  D.  Co. 
(Exhibits  D.  and  E.)  are  concerned,  the  facts  found  show 
that  there  was  no  fraudulent  representation  by  defendants 
as  to  anything  contained  therein,  and  that  plaintiff  did  not 
rely  upon  them.  She  relied  upon  her  own  judgment  and 
the  advice  of  those  who  were  assisting  her,  and  entered 
into  the  compromise  agreement  after  a  careful  and  thor- 
ough examination  of  all  the  books  and  vouchers.  The 
Court  finds  that  she  was  not  ignorant  of  any  fact  or  circum- 
stance material  to  her  rights,  that  there  were  no  misrepre- 
sentations or  concealments  by  defendants,  but,  on  the  con- 
trary, they  answered  truthfully  all  questions  relating  to  the 
affairs  of  the  company,  repeatedly  went  over  the  subjects 
under  investigation  with  Mr.  Wilson,  and  gave  him  free 
access  to  all  the  books,  and  secured  for  him  all  the  assist- 
ance and  information  in  their  power.  The  defendants  did 
not  pretend  to  know  anything  of  the  condition  of  the  affairs 
of  the  W.  D.  Co.  outside  of  what  was  shown  in  its  records, 
Mr.  Wilson  knew  this.  They  told  him  so.  They  gave 
him  every  facility  in  their  power  of  ascertaining  the  true 
state  of  the  accounts.      They  instructed  their  employes  to 


-20- 


aid  liini  as  best  tliey  could.  With  their  consent  and  ap- 
proval he  had  the  books  carefully  and  thoroughly  exam- 
ined by  experts — men  who  had  been  trusted  friends  of 
General  Colton — one  of  them  his  cousin,  another  his  secre- 
tary. In  no  part  of  his  testimony  does  Mr.  Wilson  indicate 
that  he  or  the  plaintiff  placed  any  reliance  upon  the  state- 
ments contained  in  Exhibits  D  or  E,  or  upon  any  informa- 
tion furnished  by  the  defendants  with  regard  to  the  affairs 
of  the  W.  D.  Co.  Mr.  Wilson  was  active,  alert,  self-reli- 
ant and  zealous  in  the  cause  of  his  client — the  widow  to 
whom  he  had  been  recommended  by  his  friend  Colton  as 
the  one  man  worthy  of  entire  confidence  and  trust  in  case 
of  trouble.  Spurred  on  by  a  keen  sense  of  the  trust  which 
had  been  reposed  in  him,  he  devoted  his  entire  time  and 
energy  for  a  period  of  about  six  months,  laboring  with 
clerks  and  bookkeepers,  until,  as  he  says,  he  had  exhausted 
and  tired  himself  out,  sacrificed  his  own  interests  and  had 
"abused  these  people  to  the  extremity  almost  of  fighting 
personally."  In  connection  with  his  deposition  in  this 
case  there  was  introduced  in  evidence  his  memoranda, 
taken  during  the  investigations  which  he  and  others  were 
making  into  the  affairs  of  the  W.  D.  Co.,  which  show  the 
most  unmistakable  care  and  a  painstaking  and  minute 
consideration  of  the  subject.  Upon  this  showing,  no 
doubt,  it  was  that  Judge  Temple  was  induced  to  believe 
and  find  that  plaintiff  and  her  advisers  were  ignorant  of  no 
material  fact  or  circumstance  of  which  she  ought  to  have 
been  informed.  The  presumption  would  follow  from  the 
fact  of  investigation  that  everything  material  was  discov- 
ered; but  the  presumption  is  fortified  by  the  introduction 
of  these  memoranda  and  by  proof  of  the  fact  that  many 
others  had  been  made  which  at  the  time  of  the  trial  were 
lost. 

Under  such  circumstances  is  plaintiff  entitled  to  a  rescis- 
sion of  the  contract  thus  deliberately  entered  into?  We 
think  she  is  not.  Her  counsel  claim  that  there  was  actual 
and  constructive  fraud,  and  cite  Sections  1,571,  1,572,  C. 
C. ;  they  say  that  defendants  furnished  a  list  of  the  assests 
of  the  W.  D.  Co.;  that  this  was  equivalent  to  a  positive 
assertion  that  the  list  contained  all  the  assets — an  assertion 
not  true,  not  warranted  by  the  information  of  the  parties 
making  it,  and,  therefore,    fraudulent,    although   they  be- 


—21  — 

lieved  it  to  be  true;  that  where  a  party,  acting  without 
belief  or  without  information,  makes  a  representation 
which  is  not  true,  the  law  imputes  to  him  a  knowledge  of 
its  falsity,  and  makes  him  as  fully  responsible  as  if  he  had 
such  a  knowledge.  This  is  true  as  a  general  proposition, 
where  the  other  party  has  acted  upon  the  representation, 
relying  upon  it  as  correct;  but  the  rule  as  stated  is  not  upon 
authority  or  principle  applicable  where  such  party,  dis- 
carding the  representation  as  unworthy  of  belief,  proceeds 
to  inquire  for  himself,  is  given  full  and  fair  facilities  of 
informing  himself,  takes  independent  counsel,  and,  finally, 
acts  upon  his  own  judgment  and  that  of  his  advisers.  Mis- 
representations cannot  be  predicated  upon  such  a  state  of 
facts,  (2  Parsons  on  Contracts,  770;  Percival  vs.  Horger, 
40  Iowa,  289;  Matthews  vs.  Bliss,  22  Pick.,  53;  Von  Trott 
vs.  Weise,  36  Wis.,  439;  Hall  vs.  Johnson,  41  Mich.,  289; 
Light  vs.  Light,  21  Pa.  St.,  413;  Smith  vs.  Kay,  7  H.  L. 
C,  775;  So.  Development  Co.  vs.  Silva,  125  U.  S.,  258; 
Bigelow  on  Fraud,  pp.  7,  8  ) 

We  do  not  find  anything  in  the  authorities  cited  bv  the 
appellant  which  is  in  conflict  with  the  views  we  have  ex- 
pressed. Excerpts  from  a  few  of  them  will  show  this  to 
be  the  case.  Thus,  in  Taylor  vs.  Fleet,  (i  Barb.  475)  the 
Court  said  :  "If  the  purchaser  has  acted  upon  his  own 
judgment,  and  has  not  been  influenced  by  the  misrepresen- 
tations, however  untrue,  they  may  have  been,  he  has  no 
right  to  be  released  from  his  bargain.  But  I  cannot  con- 
cur with  the  counsel  for  the  vendor  in  his  position  that  the 
purchaser  examined  the  land  with  a  view  to  test  the  ac- 
curacy of  the  representations  made  b}-  Fleet.  On  the  con- 
trary, all  the  witnesses  agree  that  no  personal  examination 
of  the  land  would  enable  any  person  not  previously  ac- 
quainted with  its  capabilities  to  determine  whether  the 
statements  made  by  Fleet  were  true  or  not.  The  only 
means  of  knowledge  within  his  reach  was  information  to 
be  obtained  from  those  whose  experience  enabled  them  to 
speak  from  actual  observation  with  respect  to  the  material 
question  which  constituted  the  object  for  which  the  pur- 
chase was  made." 

In  Rawlins  vs.  Wickham  (3  de  Gex  &  J.,  310)  the  books 
showed  so  plainly  the  fraud  that  any  man  of  ordinars'  ca- 
pacity could  have  detected  the  fraud.     The  Court  there 


says:  "During  the  negotiations  for  the  partnership,  a 
paper  was  produced  which  has  been  kept  by  Mr.  Rawlins 
from  that  time,  giving  an  account  of  the  assets  of  the 
concern.  The  amount  due  to  the  customers  of  the  bank 
was  there  stated  to  be  ^ii,ooo  and  a  fraction.  Upon  ex- 
amination of  the  books  it  appears  that  the  real  amount  ex- 
ceeded this  by  many  thousands,  a  fact  which  an  exmina- 
tion  of  the  books  by  any  person  of  the  most  ordinary  com- 
petency would  have  shown.  *  *  *  Was  there 
any  excuse  for  such  a  misrepresentation  ?  As  regards  Mr. 
Bailey  there  was  none.  He  was  a  professional  man  tak- 
ing an  active  part  in  the  affairs  of  the  bank,  and  it  was 
his  duty  to  know  them  wliether  he  did  or  not.  Mr.  Wick- 
ham  was  an  inactive  partner,  knowing  but  little  of  its 
affairs,  attending  only  occasionally  at  the  bank,  not  med- 
dling with  the  books,  and  probably  knowing  little  or 
nothing  of  what  they  contained.  *  '^  *  He 
joined  with  Mr.  Bailey  in  producing  the  statement  of  ac- 
counts which  I  have  mentioned,  and  in  ascribing  accuracy 
to  it.  Now,  he  ought  not  to  have  asserted  what  he  did 
not  know  to  be  true.  He  ought  to  have  said  :  '  It  may  be 
true;  I  have  a  good  opinion  of  Mr.  Bailey,  and  Mr.  Gat- 
trill,  but  I  am  not  acquainted  with  the  books,  and,  as  far 
as  I  am  concerned,  you  must  look  at  them  for  yourself.' 
He  did  not  do  so,  but  joined  in  a  representation  which  was 
not  true,  and,  for  every  purpose  of  pecuniary  liability,  the 
case  is  the  same  as  if  he  had  known  that  it  was  not  true. 
*  *  '^  Mr.  Rawlins  might  have  inspected 
the  books.  "  *  He,  however,  did  not  ex- 
amine them,  and,  improbable  as  it  may  appear,  I  must 
hold  that  Mr.  Rawlins  entered  into  the  partnership  in  com- 
plete ignorance  of  the  contents  of  the  books,  and  continued 
so  for  four  years.  *  *  *  j^g  ^y^^j;  entitled  to 
believe  their  representations  to  be  accurate  without  look- 
ing at  the  books.  He  was  entitled  to  continue  in  that 
belief  iditil  ground  for  suspicion  arose  ^  or  information  zvas 
given  him  by  one  of  tJic  partners .  No  such  information 
was  given.  They  did  not  coniplain  that  he  did  not  look  at 
the  books^  and  there  is  reason  to  believe  that  they  ivould  not 
have  liked  him  to  examine  them^  The  difference  between 
this  case  and  the  case  at  bar  is  too  apparent  for  comment. 


-2.S- 


In  Hif;;-gin.s  vs.  vSainels  (2  Johns  &  Heiiiinin(^s,  467)  the 
lang^iiage  of  the  Court  shows  the  distinction  between  the 
case  and  the  one  at  bar.  It  is  tliere  said  :  "It  is  not  ne- 
cessary to  show  that  the  defendants  knew  the  facts  to  be 
untrue,  if  they  siated  a  fact  which  w^as  untrue y^^r  a  frniid- 
jilciit p2irposc ^  they  at  the  same  time  not  belie:  in i^  that  fact 
to  be  true.  In  that  case  it  would  be  both  illej^al  and  im- 
moral fraud.  *  *  What  wei.i^^hs  upon  my 
mind  is  the  circumstance  that  the  quality  of  the  lime  was 
not  a  mere  subject  of  speculation^  but  a  fact  which  the  plaint- 
iff, without  any  special  familiarity  with  the  business, 
could  have  made  himself  acquainted  with." 

In  Carpmeal  vs.  Powis  (10  Beavan,  44),  the  Court  uses 
this  lant^ua^ye  :  "  Mr.  Powis  offered  to  procure  the  informa- 
tion. He  did  procure  it  and  communicate  it  to  the  plaint- 
iff, who  relied  upon  it,  and  entered  into  the  aj^reement  on 
the  credit  of  it.  It  turned  out  to  be  erroneous  ;  but  before 
the  agreement,  and  until  long  after  the  agreement,  Mr. 
Powis  appears  to  have  had  no  reason  whatever  to  suspect  that 
there  was  an}'  error.  He  adopted  it  implicitly  on  the  authority 
of  Mr.  Cuthbert^  and  very  injiocentlv  produced  it  to  the 
plaintiff  as  a  true  statement  of  tJiat  upon  icJiich  the  amount 
of  the  annuity  ivas  to  be  calculated.  If  the  plaintiff  was 
guilty  of  any  error  or  laches  it  was  in  giving  too  much 
credit  to  the  statement  which  had  been  adopted  and  com- 
municated to  him  by  the  defendant's  agent  as  true." 

In  Miller  vs.  Craig  (6  Beavan,  437),  it  appears  that  the 
plaintiffs,  who  lived  in  Scotland,  never  had  an  opportunity 
of  examining  the  accounts.  The  Court  said  that  there 
was  no  proof  whatever  that  the  plaintiffs  relied  on  Miller 
as  their  agent  in  the  treaty  with  the  other  executors.  On 
the  contrary  they  employed  their  own  solicitor,  or  law 
agent,  in  Scotland.  The  release  was  signed  in  confidence, 
in  the  belief  that  the  accounts  had  been  truly  stated. 

In  Reynell  vs.  Sprye  (i  deOex  M.  .S:.  O.,  709),  the 
Court  says  :  "  It  was  said  that  during  the  whole  of  the  ne- 
gotiations Captain  Sprye  not  only  left  Sir  Thomas  Reynell 
at  perfect  liberty  to  consult  his  friends  and  professional 
advisers,  but  even  on  several  occasions  recommended  him 
to  do  so.  To  a  great  extent  this  certainly  was  the  case  ; 
and  if  the  relief  sought  in  this  suit  had  rested  on  mere 
mistake,  if  Captain  Sj^rye  had  not,  b\-  misrepresentations  of 


—24— 

fact,  "vhich  I  cannot  treat  as  uninteutioual^  led  Sir  Thomas 
to  believe  that  his  rights  were  different  from  what  in  truth 
they  were,  it  may  be  that  the  argument'  to  which  I  am 
now  adverting  would  have  prevailed.  In  such  a  case,  per- 
haps this  Court  might  have  considered  that  it  was  the  foil)- 
of  Sir  Thomas  Reynell  to  have  acted  without  advice,  and 
might  have  refused  to  assist  any  person  who  was  so  singu- 
larly little  alive  to  his  own  rights.  ■^''  *  *  But  no  such 
question  can  arise  in  a  case  like  the  present,  where  one 
contracting  party  has  iiitentioially  misled  the  other  by  des- 
cribing rigfhts  as  different  from  what  he  knew  them  reallv 
to  be." 

In  Doggett  vs.  Emerson  (3  Story,  732),  it  appeared  to 
the  Court  that  the  purchase  of  the  plaintiff  was  made  upon 
an  entire  credit  given  to  the  representation  of  Williams  as 
to  the  quantity  and  quality  of  tlie  timber.  The  plaintiff 
resided  in  Boston  and  confessedly  had  no  knowledge  of 
timber  lands,  and  had  never  seen  the  township  in  which 
they  were  situated.  He  must,  therefore,  have  placed  im- 
plicit reliance  upon  the  statements  of  Williams.  It  ap- 
peared, also,  that  Emerson  not  only  knew  the  contents  of 
the  certificates  upon  which  the  plaintiff  relied,  but  corrob- 
orated the  statements  therein  contained. 

In  Lewin  on  Trusts,  cited  by  appellants,  the  author 
says:  "  Before  any  dealing  with  the  cestui  que  trust  the 
relation  between  the  trustee  and  cestui  que  trust  must  be 
actually  or  virtually  dissolved.  *  *  *  'The  parties 
must  be  put  at  such  arm's  length  that  they  agree  to  stand 
in  the  adverse  situations  of  vender  and  purchaser,  the 
cestui  que  trust  distinctly  and  fully  understanding  that  he 
is  .selling  to  the  trustee,  and  consenting  to  waive  all  objec- 
tions upon  that  ground,  and  the  trustee  fairly  and  honestly 
disclo.sing  all  the  necessary  particulars  of  the  estate,  and 
not  attempting  a  furtive  advantage  to  himself  by  means  of 
any  private  information.  *  ''''  ^^  Where  the  cestui  que 
trust  took  the  whole  management  of  the  sale,  hiuhself 
chose,  or  at  least,  approved  the  auctioneer,  made  surveys, 
settled  the  plan  of  .sale,  fixed  the  price,  and  .so  had  a  per- 
fect knowledge  of  the  value  of  the  property.  "^^  *  * 
Lord  fCldon  .said  that  if,  in  any  instance,  the  rule  was  to 
be  relaxed  by  consent  of  the  parties,  this  was  the  case. 
*     *     *    Again,  a  cestui  que  trust  had  urged  the  purchase 


-2o — 


upon  the  trustee,  who  at  first  expressed  an  unwillingness, 
but  afterward  agreed  to  the  terms,  and  the  sale  was  sup- 
ported. So,  where  the  trustee  had  endeavored  in  vain  to 
dispose  of  the  estate,  and  then  purchased  himself  of  the 
cestui  que  trust  at  a  fair  and  adequate  price,  and  there  was 
no  imputation  of  fraud  or  concealment,  Lord  Northington 
said  :  '  He  did  not  like  the  circumstance  of  a  trustee  deal- 
ing with  his  cestui  que  trusty  but  upon  the  whole  he  did 
not  see  any  principle  upon  which  he  could  set  the  transac- 
tion aside.  *  ''^  ^"^  If  it  be  absolutely  necessary  that 
the  propert)'  should  be  sold,  and  the  trustee  is  ready  to 
give  more  than  anyone  else,  he  may  file  a  bill  in  chancery, 
and  apply  b}'  motion  to  be  allowed  to  purchase,  and  the 
Court  will  then  examine  into  the  circumstances,  ask  who 
had  the  conduct  of  the  transaction,  whether  there  is  reason 
to  suppose  the  premises  could  be  sold  better,  and  upon  the 
result  of  that  inquiry  will  let  another  person  prepare  the 
particular  sale,  and    allow    the  trustee    to  bid.'  ''      (^Sec. 

463.)    . 

In  Boyd  vs.  Hawkins  (2  Devereaux  Eq.,  208)  we  find 
this  language:  "The  prohibition  of  the  trustee  to  pur- 
chase from  the  cestui  que  trust  himself,  is  not  found  to  be 
so  absolute.  *  -5^  ^v  Bargains  between  them 
are  viewed  with  anxious  jealous}-.  It  must  appear  that 
the  relation  has  ceased,  at  least  that  all  necessity  for 
activity  ifi  the  trust  has  terininated^  so  that  the  trustee  and 
cestui  que  trust  are  two  persons^  each  at  liberty  ivithout  the 
co7icurrence  of  the  other  to  consult  his  oivn  interest^  and 
capable  of  vindicating  it ;  or  that  there  was  a  contract 
definitively  made,  the  ter^ns  and  effect  of  ivhicJi  were  clearly 
understood^  and  that  there  rcas  no  fraud  or  misapprehen- 
sion, and  no  advantage  taken  by  the  trustee  of  the  dis- 
tresses or  ignorance  of  the  other  party.  The  purchase 
must  also  be  fair  and  reasonable." 

Mr.  Pomeroy,  in  his  work  on  Equity  Jurisprudence,  at 
Section  855,  uses  this  language:  "When  parties  have 
entered  into  a  contract  or  arrangement  based  upon  uncer- 
tain or  contingent  events,  purposely  as  a  compromise  of 
doubtful  claims-arising  from  them;  and  where  parties  have 
knowingly  entered  into  a  speculative  contract  or  transac- 
tion— one  in  which  they  intentionally  speculated  as  to  the 
result;  and  there  is  in  either  case  an  absence  of  bad  faith, 


— 2»i— 

violation  ot  confidence,  misrepresentation,  concealment 
and  other  ineqnitable  conduct  mentioned  in  a  former 
parao^raph;  if  the  facts  upon  which  such  agreement  or 
transaction  was  founded,  or  the  event  of  the  agreement 
itself,  turn  out  very  different  from  what  was  expected  or 
anticipated,  this  error,  miscalculation,  or  disappointment, 
although  relating  to  matters  of  fact  and  not  of  law,  is  not 
such  a  mistake,  within  the  meaning  of  the  equitable  doc- 
trine, as  entitles  the  disappointed  party  to  any  relief  either 
by  way  of  cancelling  the  contract  and  rescinding  the 
transaction,  or  of  defense  to  a  suit  brought  for  its  enforce- 
ment. ///  siu/i  classes  of  agrce)}ic7its  and  (ratisaciiois  tJic 
parties  are  supposed  to  calculate  the  chances^  and  they  cer- 
tainly assume  the  risks  luhere  there  is  no  element  of  bad 
faith^  breach  of  confidence^  misrepresentatio7i^  culpable 
concealment  or  other  like  conduct  amounting  to  actual  or 
constructive  fraud.'''' 

In  Badger  vs.  Badger  (2  Wall.,  73)  it  appears  that  Brooks 
took  advantage  of  his  position  as  partner,  agent  and 
brother-in-law  of  Martin  intentionally  to  conceal  from  the 
latter  the  prosperous  condition  of  the  concern,  and  pur- 
chased his  interest  for  a  price  totally  disproportioned  to  its 
real  value. 

So,  also,  in  Addington  vs.  Allen  (11  Wend.,  383)  there 
appeared  an  actual  intent  to  mislead  and  defraud  the 
plaintiff. 

In  Safford  vs.  Grout  (120  ]\Iass.,  26)  the  character  of  the 
representations  was  not  disclosed  by  the  record.  No  ob- 
jection was  made  that  they  were  mere  expressions  of 
opinion,  judgment  or  estimate,  or  that  they  were  intended 
to  be  understood  as  expressions  of  belief  only.  The  Court 
said:  "  We  must  presume  that  they  were  legally  sufficient 
to  support  the  action ;  that  is  to  say  that  they  were  state- 
ments of  facts  susceptible  of  knowledge,  as  distinct  from 
matters  of  mere  opinion  or  belief;  and  that  they  were 
calculated  to  have,  and  did  have,  material  influence  in 
deceiving  the  plaintiff  as  to  the  maker's  means  and  ability 
to  pay  in  inducing  them  to  part  with  their  property." 

All  that  is  decided  in  Redgrave  v.s.  Hurd  (20  Chanc. 
Div.,  24)  is  "that,  where  afal.se  representation  has  been 
made  it  lies  upon  the  party  who  makes  it,  if  he  wishes  to 
escape  its  effect   in   avoiding  the   contract,  to  show  that, 


although  he  made  the  false  representation,  the  defendant, 
the  other  party,  did  not  rely  upon  it.  The  onus  probandi 
is  on  him  to  show  that  the  other  party  waived  it,  and  re- 
lied on  his  own  knowledge.  Nothing  of  that  kind  appears 
here." 

In  Wells  vs.  Millet  (23  Wis.,  67)  the  Court  assume 
that,  if  the  defendant  had  been  careless  or  indifferent  to 
ordinary  and  accessible  means  of  information  as  to  the 
truth  or  falsehood  of  the  representation  which  had  been 
made,  he  would  have  had  no  right  to  rely  upon  that. 

In  Rohrschneider  vs.  Knickerbocker  L.  Ins.  Co.  (76  N. 
Y. ,  218)  the  Court  said  that  "the  fraud  was  really  undis- 
puted. The  managers  of  the  defendant  had  made  the  false 
representations,  and  they  kneic  them  to  be  false^  as  the  div- 
idends of  the  company  never  had  paid  the  notes  thus  given 
for  the  one-half  of  the  annual  premiums.  But  on  the 
contrary,  such  dividends  had  always  fallen  far  short  of 
making  such  payments;  and  they  must  have  known  that 
they  generally,  if  not  always,  would  fall  short.  There 
was,  in  fact,  no  foundation  or  excuse  whatever  for  making 
the  untrue  representations.  *  *  *  It  is  said  on  behalf 
of  the  defendant  that  the  plaintiff  did  not  rely  upon  these 
representations,  and  was  not  induced  by  them  to  take  the 
policy.  But  there  was  sufficient  evidence  from  which  the 
jury  could  have  found  that  she  did  thus  rely,  and  was  thus 
induced." 

In  Baker  vs.  Spencer  (47  N.  Y. ,  564)  the  Court  said  that 
the  appellant's  claim  that  the  settlement  of  the  action  by 
the  giving  of  a  three  hundred-dollar  note  operated  as  a 
compromise  of  the  alleged  fraud,  and  was  a  bar  to  the 
action,  might  have  been  well  taken  if  it  had  appeared  from 
the  pleadings,  or  the  findings,  that  at  the  time  of  the  .set- 
tlement the  defendant  had  knowledge  of  the  facts  consti- 
tuting the  fraud  alleged;  but  that  such  claim  was  not  well 
founded,  being  based  entirely  upon  the  statement  that  after 
giving  the  note,  the  plaintiff  began  to  suspect  that  the 
defendant  had  not  the  right  to  sell  and  transfer  the  agency. 
The  Court  said:  "It  does  not  appear  from  the  complaint, 
or  findings,  that  the  plaintiff  had  any  grounds  for  his  sus- 
picion, or  any  information  on  the  subject,  nor  what  defense 
was  interposed  on  the  trial  before  the  Justice  in  the  action 
on   the  five  hundred-dollar  note."      The  Court  then  pro- 


-2.S- 


ceeds  to  distinguish  the  case  before  it  frotii  the  case  of 
Adams  vs.  Sage  (28  N.  Y.,  103).  lu  the  latter  case  the 
Court  held  that  "where  a  party  to  whom  representations 
were  made  has  the  means  at  hand  of  determining  their  truth 
or  falsehood,  and  resorts  to  such  means,  and,  after  investi- 
gation, avows  his  belief  that  the  statements  are  false,  and 
acts  upon  such  belief  by  bringing  an  action  to  recover 
money  obtained  from  him  by  means  of  the  fraudulent  rep- 
resentations, he  is  not  entitled  to  credit  when  he  alleges 
that  upon  reiteration  of  the  truth  of  the  same  statements 
by  the  same  party  he  was  induced  to  enter  into  an  agree- 
ment to  settle  the  suit,  and  was  thereby  defrauded.  Such 
investigation  and  ascertainment  of  facts  and  belief  in  the 
falsity  of  the  representations  made,  exclude  the  idea  that 
any  reliance  could  have  been  placed  upon  the  repetition 
of  the  falsehood,  and  the  verdict  of  a  jury,  or  finding  of  a 
referee  to  the  contrary,  should  be  set  aside,  as  unsustained 
by  the  evidence.  Indeed,  upon  such  evidence  it  would 
be  error  to  submit  to  a  jury  the  question  whether  reliance 
was  or  was  not  placed  upon  the  reiterated  false  representa- 
tions. Under  the  circumstances  assumed  the  law  presumes 
that  the  party  relied  in  making  the  agreement  upon  his 
own  investigation,  and  not  upon  the  representations  of  the 
party  with  whom  he  is  dealing.  This  conduct  in  acting 
in  opposition  to  the  knowledge  acquired  by  inquiry  from 
one  who  knows  the  facts  is  attributable,  and  is  set  down  by 
the  law,  to  his  own  indiscretion  and  recklessness,  and  not 
to  any  fraud  or  surprise  of  which  under  the  circumstances 
he  has  any  right  to  complain.  *  *  =^  In  2  Parsons  on 
Contracts,  270,  the  rule  is  laid  down  in  relation  to  defenses 
to  actions  on  the  ground  of  false  representations  that  it 
must  appear  that  the  injured  party,  not  only  did,  in  fact, 
rely  upon  the  fraudulent  statement,  hut  had  a  right  to  rely 
upon  it  in  the  full  belief  of  its  truths  for  otherwise  it  was 
his  oii'n  fault  or  folly,  and  he  cannot  ask  of  the  laic  to 
relieve  him.  Many  of  the  cases  cited  by  the  author  to  sus- 
tain this  rule  hold  that,  if  the  truth  or  falsehood  of  the 
representation  might  have  been  tested  by  ordinary  vigi- 
lance and  attention,  it  is  the  party's  own  folly  if  he  neglect 
to  do  so,  and  he  is  remediless.'" 

In  Perkins    vs.    Gay    (3  S.  and  R.  331)  the    Court  said  : 
"  It  is  a  principle  of  equity  that  the  parties  to  an  agreement 


—20— 

must  be  acquainted  with  the  extent  of  their  rights,  and 
the  nature  of  the  information  they  can  call  for  respecting 
them,  else  they  will  not  be  bound.  The  reason  is  that 
they  proceed  under  an  idea  that  the  fact  which  is  the  in- 
ducement to  the  agreement  is  in  a  particular  way,  and  give 
their  assent,  not  absolutely  but  on  conditions  that  are  fals- 
ified by  the  event.  (Citing  cases.)  But  where  the  parties 
treat  upon  the  basis  that  the  fact  which  is  the  subject  of 
the  agreement  is  doubtful^  and  the  consequent  risk  each  is 
to  encounter  is  taken  into  consideration  in  the  stipulations 
assented  to,  the  contract  will  be  valid  notwithstanding  any 
mistake  of  one  of  the  parties,  provided  there  be  no  conceal- 
ment or  unfair  dealing  by  the  opposite  party  that  would 
affect  any  other  contract.  *  *  *  Every  compromise  of 
a  doubtful  right  depeuds  on  tJiis principle.  "^  '-  *  * 
There  is  an  express  mutual  abandonment  of  their  former 
rights  upon  an  agreement,  that  whether  they  be  good  or 
whether  they  be  bad,  neither  is  to  recur  to  them  on  any 
pretense  whatever,  or  claim  anything  that  he  does  not 
derive  from  the  terms  of  the  agreement.  Each  takes  his 
chance  of  obtaining  an  equivalent  for  everything  he  relin- 
quishes, and  if  the  event  turn  out  contrary  to  his  expecta- 
tions, so  much  the  worse  for  him.  If  there  be  no  intention 
of  fraud,  no  unfair  dealing,  and  neither  party  has  more 
knowledge  of  the  fact  misconceived  "than  the  other  had, 
the  contract  will  bind." 

In  Peck  vs.  Derry  i^-]  Chanc.  Div.,  577),  while  the 
Court  did  not  attribute  to  the  defendants  any  intention  to 
commit  a  fraud,  it  found  that  they  had  made  a  statement 
which  was  incorrect  to  induce  the  plaintiff  to  act  upon  it, 
luitJioiit  any  sufficient  reason  for  making  tJiat  statement.^  or 
any  sufficient  reason  for  believing  it  to  be  true. 

Kerr  on  Fraud  and  Mistake  thus  states  the  proposition  : 
"  If  a  man  to  whom  a  representation  has  been  made  knows 
at  the  time,  or  discovers  before  entering  into  a  trans- 
action that  the  representation  is  false,  or  resorts  to  other 
means  of  knowledge  open  to  him  and  chooses  to  judge  for 
himself  in  the  matter,  he  cannot  avail  himself  of  the  fact 
that  there  has  been  misrepresentation;  *  ■^"  *  or  say 
that  he  has  acted  on  the  faith  of  trie  rcprese)itatio)i.  '^"  * 
If  the  party  to  whom  the  representations  were  made,  him- 
self resorted  to  the  proper  means  of  verification  before  en- 


-:50— 


tering  into  the  contract,  it  may  appear  that  he  relied  on 
tlie  resnlts  of  his  own  investig'ation  and  inqniry,  and  not 
upon  the  representations  made  to  him  by  the  other  party. 
*  *  *  If  the  subject  is  in  its  nature  uncertain,  if  all 
that  is  known  is  matter  of  inference  or  something;  else,  and 
if  the  parties  making-  and  receiving  representations  on  the 
subject  have  equal  knowledge  and  means  of  acquiring 
knowledge,  it  is  not  easy  to  presume  that  the  representa- 
tions made  by  the  one  could  have  much  or  any  influence 
upon  the  other/'  (Pages  75  to  78.)  Speaking  of  fiduciary 
relation  the  author  says  :  "A  transaction  between  them 
(trustee  and  cestui  que  trust)  will  be  supported  if  it  can  be 
shown  to  the  satisfaction  of  the  Court  that  the  parties  were 
notwithstanding  the  relation  substantially  at  arm's  length, 
and  on  equal  footing,  and  that  nothing  has  happened 
which  might  not  have  happened  had  no  such  relation  ex- 
isted. The  burden  of  proof  lies  in  all  cases  upon  the  party 
who  fills  the  position  of  active  coujidoicc  to  show  that  the 
transaction  has  been  fair.  If  it  can  be  shown  to  the  satis- 
faction of  the  Court  that  the  other  party  had  competent 
and  disinterested  or  independent  advice,  or  that  he  per- 
formed the  act,  or  entered  into  the  transaction  voluntarily, 
deliberately  and  ad\'isedh',  knowing  its  nature  and  effect, 
and  that  his  consent  was  not  obtained  by  reason  of  the 
power  of  influence  to  which  the  relation  gave  rise,  the 
transaction  will  be  supported.'' 

In  Shaw  vs.  Stine  (8  Bosw.,  159)  it  is  held  that  the  true 
test  in  ca.ses  of  false  representations  may  be  found  in  the 
inquiry  whether  the  plaintiff  would  have  entered  into  the 
contract  if  the  false  representations  had  not  been  made. 
If  he  would,  then  the  false  representations  did  not  con- 
tribute to  the  sale. 

In  Matthews  vs.  Bliss  (22  Pick.,  53)  it  is  held  that  where 
one  of  the  parties  has  an  advantageous  knowledge,  if  he 
exercise  a  studied  effort  to  prevent  the  other  from  coming 
to  the  knowledge  of  the  truth,  or  if  there  be  any,  though 
slight,  false  and  fraudulent  suggestion  or  reprc'-entation, 
then  the  transaction  is  tainted  with  turpitude,  and  alike 
contrary  to  the  rules  of  inorality  and  of  law. 

In  Gilbert  vs.  Endean  (9  Chanc.  Div.,  268)  there  was  a 
material  fact  intentionally  concealed,  namelv,  that  the  son 
was  without  means  because  the  father  was  still  alive,  and 
was  still  rcfusinir  to  assist  him. 


-31  — 


Some  of  these  cases,  it  will  be  observed,  involved  trans- 
actions between  trustee  and  cestui  que  trust  and  are  ap- 
plicable to  the  first  proposition  discussed  herein. 

After  the  execution  of  the  compromise  ag^reement  the 
W.  D.  Co.  paid  an  indebtedness  of  over  $3,000,000,  with 
interest,  to  the  C.  P.  with  S.  P.  bonds  at  90  cents  on  the 
dollar.  These  bonds  were  represented  to  plaintiff  to  be 
worth  60  cents  on  the  dollar.  It  is  now  claimed  that  the 
transfer  to  the  C.  P. ,  a  few  days  after  the  compromise,  at 
90  cents  on  the  dollar  is  conclusive  evidence  that  they  were 
worth  90  cents  on  the  dollar  at  the  time  they  were  repre- 
sented to  be  worth  60  cents  and  that  this  was  a  fraud  on 
the  plaintiff — at  least  that  there  is  an  equitable  estoppel 
preventing  defendants  from  claiming  that  they  were  not 
worth  90  cents  at  the  time  of  the  compromise.  The  trans- 
action seems  to  have  been  one  in  which  the  defendants  practi- 
cally dealt  with  themselves.  They  paid  off  the  debt  of  the 
W.  b.  Co.  to  the  C.  P.  Co.,  with  bonds  of  the  S.  P.  Co.,  and 
themselves  fixed  the  value  of  the  bonds  at  what  they  sup- 
posed they  would  be  worth  when  they  should  be  called 
on  to  pay  the  C.  P.  bonds.  Equitable  estoppels  must  bfe 
mutual.  If  the  defendants  in  attempting  to  pay  off  some 
debt  similar  to  that  of  the  W.  D.  Co.,  about  the  time  the 
compromise  was  effected  had  rated  the  S.  P.  bonds  at  25 
cents  on  the  dollar  would  their  act  fix  irrevocably  the  mar- 
ket value  of  the  bonds  so  that  Mrs.  Colton  would  have 
been  bound  by  tJieir  act  and  forever  thereafter  estopped  from 
proviui^  that  in  fact  they  were  zcorth  more?  The  transaction 
was  but  a  temporary  mode  of  settling  up  a  corporate  obliga- 
tion. The  Court  weighed  it  as  evidence,  and  as  the  intrin- 
sic value  of  the  property  did  not  enter  into  the  questions 
involved  in  the  compromise,  we  do  not  perceive  any 
ground  upon  which  plaintiff  can  complain.  (Friz  vs. 
Binn,  55  Cal.,  461;  2  Sutherland  on  Damages,  374; 
Kountz  vs.  Kirkpatrick,  72  Penn.,  St.,  389).  Furthermore, 
the  values  set  opposite  to  the  names  of  the  stocks  men- 
tioned the  Court  finds  were  not  relied  upon,  and,  in  fact, 
the  controversy  was  chiefly  over  this  very  matter,  I\Ir.  Wil- 
son insisting  all  the  time  that  they  were  too  low  and  the 
defendants  contending  that  they  could  not  afford  to  allow 
more  for  them.      (See  Findings  26  and  27.) 

The  charge  that  Mrs.  Colton  was  induced  b\-  threats  to 


—32— 

enter  into  the  contract  is  unequivocally  denied  by  Mr.  Wil- 
son in  the  following  testimony  : 

"  O. — Now,  in  the  course  of  these  negotiations,  did  the 
defendants  or  any  of  them,  make  any  threat  in  reference  to 
aspersing  the  menior}'  of  General  Colton,  unless  a  settle- 
ment was  made,  or  anything  of  that  kind  ? 

"A. — No,  sir;  nothing  of  the  kind."  (See  Findings 
43  a"d  45). 

Counsel  for  appellant  rely  with  much  confidence  for  a  re- 
versal of  the  judgment  upon  the  20th  finding  of  the  Court, 
which  is  as  follows  : 

"That  the  individual  defendants,  prior  to  the  execution 
of  the  contract,  '  Exhibit  F,\and  during  the  negotiations 
which  preceded  and  led  to  that  contract,  stated  and 
represented  to  the  plaintiff  that  D.  D.  Colton  had  in  his 
hands  and  standing  in  his  name  on  the  books  of  said  com- 
pany 408  shares  of  the  capital  stock  of  the  Rocky  Mount- 
ain Coal  and  Iron  Company,  which  were  in  truth  and  in 
fact  the  property  of  and  belonging  to  Stanford,  Hunting- 
ton, Crocker  and  the  estate  of  Mark  Hopkins,  in  equal  pro- 
portions, and  which  were  held  by  said  Colton  in  trust  for 
them  and  said  estate  of  Mark  Hopkins,  and  that  upon  pay- 
ing the  plaintiff,  as  successor  of  said  D.  D.  Colton,  the  cost 
price  of  said  408  shares  of  stock,  which  they  represented 
to  be  $6,625.92,  they  were  entitled  to  have  said  408  .shares 
assigned,  transferred  and  delivered  to  them.  That  the 
plaintiff  relied  upon  said  statement  and  representation,  and 
accordingly  did  assign  and  transfer  said  .shares  of  stock  by 
and  in  .said  agreement  and  contract  .sought  to  be  rescinded 
b\-  this  action. 

"That  said  representation  was  not  true  and  was  made 
by  said  defendants  without  due  circumspection  and  was 
unwarranted  by  the  facts  within  their  knowledge. 

"That  in  truth  and  in  fact  said  Colton  did  have  in  his 
possession,  and  there  were  standing  in  his  name  on  the 
books  of  the  company,  only  240  shares  of  stock,  which  he 
held  as  trustee  of  said  defendants  and  the  estate  of  Mark 
Hopkins,  and  to  that  extent  of  168  shares,  .said  representa- 
tion was  a  false  representation. 

"  That  .said  representation,  however,  was  not  made  with 
any  actual  fraudulent  intent,  but  through  inadvertence  and 
lack  of  due  circumspection.     And  that  said  contract  would 


have  been  executed  by  the  plaintiff  had  she  known  the 
truth  in  regard  to  said  stock,  if  the  defendants,  upon  being 
made  aware  of  the  facts,  had  still  insisted  upon  it. 

"  That  during  the  negotiations  which  resulted  in  the 
making  of  the  compromise  expressed  in  '  Exhibit  F,'  Mr. 
S.  M.  Wilson  knew  precisely  wdiat  the  claim  of  defendants 
was  as  to  the  aforesaid  408  shares  of  said  Rocky  Mountain 
Coal  and  Iron  Company  stock  ;  had  the  books  of  last  men- 
tioned corporation  before  him,  including  the  dividend 
book  ;  knew  that  Colton  had  collected  dividends  for  sev- 
eral years  on  said  408  shares  of  stock  ;  knew  that  the  claim 
of  defendants  to  said  408  shares  of  Rocky  Mountain  Coal 
and  Iron  Company's  stock  was  supported  by  no  written 
evidence. 

"Defendants  also  claimed  from  the  estate  of  Colton  the 
dividends  on  the  stock  of  the  Rock\-  Mountain  Coal  and 
Iron  Company,  which  they  asserted  to  be  held  in  trust  for 
them." 

It  is  contended  that  this  finding  conclusively  establishes 
the  fact  that  plaintiff  was  induced  to  enter  into  the  con- 
tract by  a  false  representation  as  to  a  material  fact ;  that  it 
is  immaterial  whether  the  representation  was  the  result  of 
an  innocent  mistake,  it  having  been  made  without  due 
circumspection,  which  is  the  equivalent  of  a  positive  asser- 
tion of  a  fact  without  knowing  it  to  be  true,  or  being  war- 
ranted by  the  information  of  the  person  making  it  ;  that  it 
is  not  necessary  the  false  representation  should  have  been 
the  sole  or  controlling  inducement  to  the  making  of  the 
contract,  it  being  sufficient  to  defeat  the  contract  if  it  ap- 
pear that  it  was  one  of  the  inducements  and  a  motive  of 
her  action  ;  that  the  Court  could  not  say  as  a  matter  of  fact 
or  matter  of  law  if  she  had  known  the  truth  in  regard  to 
the  stock,  she  would  have  executed  the  contract,  provided 
the  defendants,  upon  being  made  aware  of  the  ficts,  had 
still  insisted  upon  it. 

There  are  cases  in  which  it  could  not  be  said,  in  view 
of  the  evidence,  that  the  party  would  have  entered  into 
the  contract  if  the  false  representation  had  not  been  made, 
and  there  are  many  cases  reported  in  which  the  courts 
have  said  that  it  was  error  to  apply  the  rule  referred  to. 
But  where  it  clearly  appears  from  the  evidence  that  the 
contract    would   have   been  made  if  the   truth    had  been 


-84- 


kiiown,  we  see  no  reason  why  the  Court  may  not  find 
tlie  fact  and  act  upon  it.  If,  as  a  matter  of  fact,  the 
contract  would  have  been  without  regard  to  the 
character  or  force  of  the  representation  relied  upon  for  a 
rescission,  the  plaintiff  cannot  complain.  As  said  by  Judge 
Temple  : 

''  The  power  to  cancel  a  contract  is  a  most  extraordinary 
power.  It  is  one  which  should  be  exercised  with  great 
caution,  nay,  I  may  say,  with  great  reluctance,  unless  in 
a  clear  case.  A  too  free  use  of  this  power  would  render 
all  bu.siness  uncertain,  and,  as  has  been  said,  make  the 
length  of  a  Chancellor's  foot  the  measure  of  individual 
rights.  The  greatest  liberty  of  making  contracts  is  essen- 
tial to  the  business  interests  of  the  country.  In  general 
the  parties  must  look  out  for  themselves." 

Our  Code  provides  that  a  contract  may  be  rescinded  '4f 
the  consent  of  the  party  rescinding  ^  *  ''''  was  given 
by  mistake,  or  obtained  through  duress,  menace,  fraud  or 
undue  influence."  (Section  1,689,  C.  C.)  Section  1,565, 
C.  C. ,  says  : 

"  The  consent  of  the  parties  to  a  contract  must  be  : 

"  I.     Free; 

"2.     Mutual  ;  and 

"3.     Communicated  by  each  to  the  other." 

Sections  1,566,  1,567  and  1,568,  C.  C,  read  as  follows: 

"1,566.  A  consent  which  is  not  free  is  nevertheless 
not  absolutely  void,  but  may  be  rescinded  by  the  parties, 
in  the  manner  prescribed   by  the  Chapter  on  Rescission." 

"  1,567.  An  apparent  consent  is  not  real  or  free  when 
obtained  through  : 

"  I .   Duress ; 

"  2.   Menace; 

"3.   Fraud; 

"4.   Undue  influence,  or, 

"5.  Mistake." 

"1,568.  Consent  is  deemed  to  have  been  obtained 
through  one  of  the  causes  mentioned  in  the  last  section 
only  ci'/icn  it  rcoii/d  not  have  been  given  had  such  cause  not 
existed. ' ' 

The  most  that  can  be  said  in  support  of  appellant's 
contention  is  that  there  is  a  conflict  in  the  decisions  on  the 
subject,  but  the  .sections  of  the  Civil  Code  above  quoted  are 


clear  and  unambiguous  in  language,  and  they  seem  to 
establish  the  rule  beyond  all  controversy  that  the  contract 
cannot  be  rescinded  when  it  appears  that  consent  would 
have  been  given  and  the  contract  entered  into  notwith- 
standing the  duress,  menace,  fraud,  undue  influence  or 
mistake  relied  upon.  A  misrepresentation  as  the  basis  of 
rescission  must  be  material,  but  it  can  be  material  only 
when  it  is  of  such  a  character  that  if  it  had  not  been  made 
the  contract  would  not  have  been  entered  into.  The  mis- 
representation, it  is  true,  need  not  be  the  sole  cause  of  the 
contract,  but  it  must  be  of  such  nature,  weight  and  force 
that  the  Court  can  say  "without  it  the  contract  would  not 
have  been  made." 

That  the  Code  Commissioners  recognized  the  fact  of  a 
conflict  of  authority  upon  this  subject,  and  desired  to  settle 
it  in  accordance  with  what  seems  to  us  to  be  the  plain 
meaning  of  the  language  used  in  Section  1,568,  C.  C,  is 
apparent,  we  think,  from  the  authorities  quoted  by  them 
in  a  note  to  that  section.  Thus,  in  Flight  vs.  Booth,  (i 
Bing  New  Cases,  376),  the  Court  said:  "It  is  extremely 
difficult  to  lay  down  from  the  decided  cases  any  certain, 
definite  rule  which  shall  determine  what  misstatement^  or 
misdescription  in  the  particulars  shall  justify  a  rescinding 
of  the  contract,  and  what  shall  be  ground  of  compensation, 
only.  All  the  cases  concur  in  this,  that  where  the  mis- 
statement is  willful,  or  designed,  it  amounts  to  fraud;  and 
such  fraud,  upon  general  principles  of  law,  avoids  tlie 
contract  altogether.  But  with  respect  to  misstatements 
which  stand  clear  of  fraud,  it  is  impossible  to  reconcile  all 
the  cases;  some  of  them  laying  it  down  that  no  misstate- 
ments which  originate  in  carelessness,  however  gross,  shall 
avoid  the  contract,  but  shall  form  the  subject  of  compen- 
sation only;  *  ^'  *  whilst  other  cases  lay 
down  the  rule  that  a  misdescription  in  a  material  point, 
although  occasioned  by  negligence  only,  not  by  fraud,  will 
vitiate  the  contract  of  sale'.  In  this  state  of  discrepancy 
between  the  decided  cases,  we  think  it  is,  at  all  events,  a 
safe  rule  to  adopt,  that  where  the  misdescription,  although 
not  proceeding  from  fraud,  is,  in  a  material  and  substantial 
point,  so  far  affecting  the  subject  matter  of  the  contract 
that  it  may  reasonably  be  supposed  that,  but  for  such  mis- 
description, the  purchaser  might  never  have  entered   into 


-:m\- 


the  contract  at  all,  in  such  case  the  contract  is  avoided 
altogether  and  the  purchaser  is. not  bound  to  resort  to  the 
clause  of  compensation."  In  Shaw  vs.  Stine  (8  Bos- 
worth,  159),  a  case  also  cited  by  the  Code  Commissioners, 
the  Court  said:  "  The  true  test  in  such  cases  may  be  found 
in  the  inquiry  whether  the  plaintiff  would  have  sold  the 
goods  if  the  false  representations  had  not  been  made.  If  he 
would,  then  the  false  representations  did  not  contribute  to 
the  sale,  for  he  would  have  made  the  sale  without  them." 
They  also  cite  Section  1,819  of  the  Civil  Code  of  Louisi- 
ana, which  reads  as  follows:  "  The  error  in  the  cause  of  a 
contract,  to  have  the  effect  of  invalidating  it,  must  be  on 
the  principal  cause  when  there  are  several;  this  principal 
cause  is  called  the  motive^  and  means  that  consideration 
without  which  the  contract  would  not  have  been  made." 
(See,  also,  the  cases  cited  by  appellant  and  reviewed  herein 
on  another  topic.) 

Here  the  Court  found  that  plaintiff  never  intended  after 
the  death  of  her  husband  to  go  on  with  the  enterprises  in 
which  he  and  the  defendants  had  been  interested — that  she 
did  not  intend  to  take  any  further  risks  in  the  business 
ventures;  that  the  transaction  was  a  lumping  settlement, 
all  parties  understanding  it  to  be  such,  and  that  no  accurate 
adjustment  of  the  accounts  could  be  had;  that  the  repre- 
sentatioji  as  to  this  stock  zcas  made  ivithoiit  any  actuat  fraud- 
ulent intent^  but  through  inadvertence^  and  the  plaintiff 
ivould  have  executed  the  contract  sought  to  be  rescinded  had 
she  k)io7vn  the  truth  in  regard  to  the  matter  if  defendants 
had  insisted  07i  it ;  that  Wilson  knew  exactly  what  defend- 
ants' claim  as  to  the  stock  was,  had  the  books  of  the  com- 
pany, including  the  dividend  book,  examined  them,  knew 
that  Mr.  Colton  had  collected  dividends,  and  that  defend- 
ants' claim  was  not  supported  by  any  written  evidence; 
that  Wilson  made  a  thorough  investigation  into  the  affairs 
of  the  R.  M.  C.  &  I.  Co.,  and  had  many  sources  of  informa- 
tion other  than  those  possessed  by  the  defoidants^  and  was 
more  thoroughly  acquainted  with  and  better  qualified  to 
form  an  accurate  judgment  as  to  the  condition  of  the  affairs 
of  that  company  than  were  the  defendants,  or  either  of 
them;  that  Mr.  Douty,  cousin  and  friend  of  Mr.  Colton, 
and  bookkeeper  of  said  company;  Mr.  Green,  Secretary  of 
General  Colton   in  his  lifetime,  and   Mr,   Steinberger,   an 


37— 

old  friend,  frequently  consulted  with  plaintiff  and  Wil- 
son with  regard  to  the  business  in  hand;  that  plaintiff 
placed  no  reliance  upon  the  defendants,  and  had  no  con- 
fidence in  them;  and  that  before  consummating  the  agree- 
ment, she  had.  discovered  many  inaccuracies  in  the  state- 
ments they  had  presented.  At  that  time  there  was  one 
error  in  the  account  of  the  W.  D.  Company,  which  would, 
if  known,  have  shown  the  liabilities  of  that  company  to 
be  $1,000,000  greater  than  they  were  represented. 

In  a  transaction  involving  such  vast  properties  and  values 
as  we  find  here  the  amount  involved  in  this  particular 
transaction  is  comparativel}^  a  small  item,  only  about  $10,- 
000.  But  if  the  defendants  had  relied  upon  their  strict 
rights  in  regard  to  this  stock  they  would  have  been  entitled 
to  receive  back  the  dividends  on  the  240  shares  wrongfuU}' 
appropriated,  with  interest  on  each  one,  from  the  time  it 
was  so  taken,  and  plaintiff  would  have  been  entitled  to  re- 
ceive the  purchase  price  of  the  240  shares  and  interest  upon 
it  from  the  time  it  was  paid.  So  that  if  the  truth  had  been 
stated  and  the  controversy  as  to  this  particular  stock  had 
been  settled  upon  a  fair  accounting,  plaintiff  would  not  have 
been  more  than  $1,000  or  $2,000  better  off  than  the  set- 
tlement left  her.  From  all  the  circumstances  of  the  case 
Judge  Temple  concluded  that  this  representation  as  to  the 
168  shares  had  no  material  influence.  It  is  true,  the  Judge 
states,  "  that  the  plaintiff  relied  upon  said  statement  and 
representation,  and  accordingly  did  assign  and  transfer 
said  shares  of  stock  by  and  in  said  agreement  and  con- 
tract sought  to  be  rescinded  in  this  action."  Plaintiff 
believed — at  least  assumed — the  statement  of  defendants 
as  to  this  stock  to  be  true,  and  therefore  assigned  it.  This 
is  entirely  consistent  with  the  finding  that  she  would 
have  executed  the  compromise  agreement  had  she  known 
the  truth  in  regard  to  the  stock.  From  all  the  circum- 
stances, especially  the  testimony  of  Mr.  Wilson,  it  is  made 
very  clear  that  this  representation  was  not  an  inducing 
cause  of  plaintiff 's  action.  Speaking  upon  this  subject, 
the  Court,  in  its  opinion,  said  that  "W^ilson  concluded  it 
would  do  no  good  unless  he  could  satisfactorily  explain 
away  charges  of  appropriating  $181,000.  In  comparison 
with  these  figures  the  sum  involved  in  this  unwarranted 
assertion  is  small.      But,    I    think,   on  general  principles. 


311784 


in  a  matter  of  such  inagiiitiide  as  this,  such  a  mistake  or 
misrepresentation  would  not  justify  setting  aside  the  agree- 
ment, especially  where,  as  here,  expenditures  have  been 
made  by  the  defendants  on  the  faith  of  the  agreement, 
which  have  materially  enhanced  the  value  of  the  property 
involved  in  the  litigation."  In  these  observation  of  the 
learned  Judge  we  full)"  concur. 

It  remains  onh-  to  consider  whether  there  was  any  un- 
conscionable advantage  taken  of  plaintiff.  This  question 
must  be  determined,  not  in  the  light  of  subsequent  events, 
but  upon  the  circumstances  existing  at  the  time  of  the 
negotiations  and  the  execution  of  the  contract.  The  Court 
found  that  defendants  did  not  obtain  great  advantage, 
or  any  advantage  over  plaintiff,  and  that  the  agreement 
was  fair,  just  and  equal.      (Finding  45.) 

The  question  whether  there  has  been  an  undue  advan- 
tage— an  unconscionable  exercise  of  a  superior  power — de- 
pends largely  upon  the  situation  of  the  parties  at  the  time 
of  the  negotiations. 

The  immediate  cause  of  the  trouble  between  the  parties 
arose  from  the  fact  that  after  the  death  of  General  Col  ton, 
who  had  been  President  and  Treasurer  of  the  R.  M.  C.  & 
I.  Co.  from  January  i,  1871,  until  the  time  of  his  death, 
the  books  and  papers  of  that  corporation  showed  that  he 
had  used  large  sums  of  money  belonging  to  that  company, 
for  which  he  had  never  accounted.  He  had  also  taken 
large  amounts  which  he  designated  as  salary,  in  contra- 
vention of  the  terms  of  his  agreement  with  Mr.  Crocker, 
and  with  the  other  associates.  There  were  also  some  seri- 
ous irregularities  in  his  account  with  the  W.  D.  Co.,  of 
which  he  had  been  manager  from  its  organization  in  De- 
cember, 1874.  The  latter  company  was  heavily  in  debt. 
It  owed  at  that  time  to  Stanford,  Crocker  and  the  estate  of 
Hopkins,  over  $10,000,000.  Its  assets  consisted  chiefly  of 
railroad  stpck  and  bonds  wdiich  had  no  market  value. 
Mrs.  Colton  concluded  before  the  commencement  of 
the  negotiations  that  she  could  not  go  on  with  the  enter- 
prise in  which  her  husband  had  been  interested.  (These 
facts  are  found  by  the  Court.) 

In  one  of  the  preliminary  interviews  with  Mr.  Crocker, 
when  asked  whether  she  wished  to  pay  for  the  stock  pur- 
chased bv  Mr.  Colton,  and  continue  along  in  the  execution 


-39— 


of  the  corporate  schemes  which  her  husband  had  helped  to 
advance,  she  replied  that  "she  was  in  no  condition  or  state 
to  build  railroads,"  and  her  chief  adviser,  IMr.  Wilson, 
said  in  his  testimony,  "very  early  in  the  conversations  that 
I  had  with  Mrs.  Colton  it  was  agreed  and  understood  be- 
tween us  that  she  was  to  sell  out  her  interest  there,  and 
not  to  remain  in  the  railroad.  That  was  our  leading  prop- 
osition from  the  beginning  of  my  relation  with  the  busi- 
ness, and  we  never  swerved  or  never  wavered  on  that. 
*  ^  *  We  had  made  up  our  minds  that  she  should  not 
go  ahead.  *  *  ^''  We  had  already  determined  that  she 
should  not  go  ahead,  and  would  get  out  if  she  should  get 
a  certain  sum  of  money."  It  must  be  remembered  that 
the  plaintiff  herself  first  sought  a  settlement — a  fact  which 
deserves  attention.  As  was  said  in  Morse  vs.  Royal,  12 
Vesey,  275,  by  Lord  Eldon  :  "  This  is  not  a  trustee  lookr 
ing  around  him  and  fixing  his  eye  upon  this  property,  as 
increasing  in  value.  It  is  in  evidence  that  Mor.se  deter- 
mined to  sell  it,  and  if  he  could  not  get  what  he  wanted 
that  he  would  put  it  up  at  Gara way's  ;  that  he  frequently 
teased  Vanheylin  to  purchase  it,  who  was  reluctant,  but 
at  last  said  he  would  go  the  length  of  giving  ^5,000.'' 
So  in  the  case  at  bar,  Mr.  Huntington,  in  his  deposition, 
sa\s  that  he  was  teased  into  making  the  settlement.  In 
many  cases  we  have  examined,  the  fact  that  the  party  en- 
deavoring to  rescind  the  compromise  agreement  made  the 
first  proposal,  and  persuaded  the  other  party  to  enter  into 
the  agreement,  has  been  adverted  to  and  considered  by  the 
Court  as  an  important  factor  in  determining  the  rights  of 
the  plaintiff  to  a  rescission  of  the  contract.  (Harrison  vs. 
Guest.  6  deGex  ]\I.  &  G.,  433  ;  Montesqueiu  vs.  Sandys, 
18  Vesey,  311.) 

The  evidence  before  us  shows,  without  conflict,  that  the 
defendants  did  not  want  to  make  the  settlement  with  plain- 
tiff which  was  made,  or  any  settlement  at  that  time.  The 
circumstances  were  .so  unfavorable  for  the  prosecution  of 
the  plans,  which  had  been  laid  out,  that  the  surviving  as- 
sociates believed  they  required  more  help  financial  and  ex- 
ecutive, rather  than  more  property  in  the  hands  of,  and  to 
be  managed  b)-,  the  survivors.  Mr.  Wilson,  in  his  dispo- 
sition, referring  to  this  matter,  says:  ''Several  times 
during  our  later  negotiations  they  had  stated  that  they  did 


-40— 


not  care  about  buying  her  out;  they  would  do  it  at  certain 
prices,  at  this  rate;  but  they  would  prefer  she  should  go 
on  and  meet  her  obligations,  and  be  enabled  to  meet  her 
advances  for  the  needs  of  the  building  of  the  railroads,  if 
they  would  be  called  for  from  time  to  time;  that  they 
would  prefer  that  she  should  stay  in;  they  wanted  money; 
they  had  not  any  money  to  pay  out,  and  they  wanted 
money.  They  preferred  to  get  money  in  rather  than  to 
pay  it  out."  The  Court  also  found  that  the  defendants,  at 
the  time  they  requested  plaintiff  to  continue  along  with 
them  in  the  corporation,  offered  to  manage  her  interest  for 
her  as  well  as  they  could  their  own,  and  promised  that 
she  should  receive  the  full  benefit  of  their  knowledge  and 
experience,  and  that  they  would  get  every  dollar  they 
could,  and  "  share  with  her  to  the  last  cent."  (Finding4i). 
The  Southern  Pacific  Railroad  was  finished  to  the  Colo- 
rado river,  at  Yuma,  in  September,  1877.  Mr.  Hopkins 
has  always  been  opposed  to  building  the  road  east  of  the 
Colorado,  and  for  that  reason  the  work  of  construction 
stopped  at  that  point.  After  the  death  of  Mr.  Hopkins, 
which  occurred  on  March  29,  1878,  Mrs.  Hopkins  was 
very  unwilling,  in  fact,  was  probably  unable  before  the  dis- 
tribution of  the  estate,  which  was  in  process  of  admini- 
stration, to  furnish  any  money,  and  for  that  reason  opposed 
the  W.  D.  Co.  engaging  in  any  new  schemes.  As  stated 
before,  that  company  was,  at  the  time,  heavily  indebted  to 
various  parties,  and  its  assets  consisted  of  unmarketable 
stocks  and  bonds.  After  the  death  of  Mr.  Hopkins  the 
surviving  associates  concluded  that  they  would  build  the 
road  east.  The  organization  of  a  new  construction  com- 
pany had  been  agreed  upon  during  General  Col  ton's  life- 
time, and  but  a  short  time  before  his  death  the  Southern 
Pacific  of  Arizona  was  incorporated,  and  he  became  a  mem- 
ber thereof,  with  30,000  shares  of  the  capital  stock  in  his 
name.  The  associates  had  lost  the  aid  and  encouragement 
of  both  Mr.  Hopkins  and  General  Colton,  in  whose  execu- 
tive ability  and  good  judgment  they  had  unlimited  confi- 
dence. On  May  5,  1879,  the  Supreme  Court  of  the 
United  States  affirmed  the  validity  of  the  Thurman  Act, 
which  took  from  the  defendants  25  per  cent,  of  the  net 
earnings  of  the  Central  Pacific  to  .secure  the  Government. 
At  that  time  the  Central  Pacific  was  apparently  the  source 


—41 


of  all  income  and  credit  to  the  defendants.  The  debt  of 
the  Central  Pacific  was  over  $100,000,000.  The  affirmance 
of  the  validity  of  this  Act  threw  the  associates,  especially 
Mr.  Colton,  in  great  despondency.  He  declared  that  the 
construction  plant  should  be  sold,  and  that  no  more  road 
should  be  built  until  they  had  money  laid  up  in  bank. 
He  declaimed  bitterly  against  the  communistic  tendency 
of  the  times.  It  was  a  year  of  remarkable  political  ex- 
citment.  There  was  a  general  business  depression  all 
over  the  countr>-,  and,  hi  fact,  the  whole  commercial  world, 
for  a  year  or  more  preceding  the  time  of  these  negotiations. 
In  the  midst  of  these  negotiations  there  was  in  session  in 
this  State  a  Constitutional  Convention,  which  formulated 
and  promulgated  the  Constitution  ratified  in  May,  1879. 
Into  this  Constitution  there  were  incorporated  many  new 
and  novel  features,  especially  those  relating  to  the  taxation 
of  railroad  property  and  the  fixing  of  freights  and  fares. 
The  outlook  for  the  parties  was  very  dark.  Of  course,  it 
is  easy  to  say,  in  the  light  of  subsequent  circumstances, 
that  their  fears  as  to  the  evil  effects  of  the  provisions  of  the 
new  Constitution  were  largel)'  groundless,  but  there  was  a 
real  panic  in  railroad  aftairs  at  that  time.  True,  confidence 
was  soon  restored  and  their  fears  have  not  been  realized. 
It  certainly  is  not  the  fault  of  these  defendants  that  they 
became  despondent  during  that  period,  or  that  the  tran.s- 
actions,  unfortunately  for  this  plaintiff,  were  consummated 
during  such  gloomy  times.  It  was  impossible  for  them  to 
discontinue  their  operations  without  utter  disaster  to  all 
their  enterprises.  Their  road  was  built  several  hundred 
miles  into  a  des.sert.  To  make  it  useful  at  all  it  was  nec- 
essary to  connect  it  with  the  Eastern  system  of  railroads. 
There  was  actual  danger  of  active  competition.  To  make 
the  road  a  success  this  competition  had  to  be  headed  off. 
The  value  of  the  assets  of  the  W.  D.  Co.  depended  almost 
entirely  upon  the  completion  of  the  road  which  had  been 
projected.  It  is  important,  we  think,  that  these  facts  .should 
be  remembered  in  determining  the  fairness  of  the  trans- 
action between  the  parties.  It  is  the  misfortune  of  the 
plaintiff  that  she  had  not  the  means  or  disposition  to  accept 
and  act  upon  the  proposition  made  by  the  defendants  to 
continue  on  with  them  in  their  operations.  It  is  an  impor- 
tant fact  to  remember,  too,  that  the  demand  for  the  rescis- 


—42— 

siou  of  the  compromise  agreement  came  from  the  plaintift 
over  two  years  after  the  execution  of  the  contract,  and  at 
a  time  when  the  gloom  and  depression  had  given  way  to 
an  active  "boom''  in  railroad  business — a  time  when  there 
was  a  most  unprecedented  demand  for  railroad  securities, 
owing  to  which  the  defendants  found  themselves  in  a  most 
prosperous  condition.  The  Court  below  evidently  con- 
sidered the  matter  of  delay  in  bringing  this  action  an 
important  factor,  especially  as  the  plaintiff  had  success- 
fully forced  a  settlement  upon  the  defendants — at  a  time 
when  many  of  their  securities  had  no  market  value, 
when  they  were  all  subject  to  great  fluctuation,  and  when 
the  question  of  the  solvency  or  insolvency  of  their  con- 
cerns depended  solely  upon  the  market  value  of  such  secu- 
rities— and  had  deliberately  entered  into  the  settlement 
with  full  means  of  information,  and  upon  full  advice  of 
many  competent  friends.  The  failure  of  plaintiff  to  inform 
herself  as  to  the  facts  upon  which  she  relied,  and  to  proceed 
to  rescind  the  contract,  until  the  property  had,  under  for- 
tuitous circumstances,  become  immensely  enhanced  in 
value,  is  an  important  circumstance  to  be  considered. 
(Nicholson  vs.  Janeway,  i6  N.  J.  Eq.,  285;  ^Murray  vs. 
Elston,  24  Id.,  310;  Twin  Lick  Oil  Company  vs.  IMarbury, 
91  U.  S.,  587;  Kitchen  vs.  St.  L.  K.  &  R.  W.  Co.,  69  Mo., 
224). 

Mrs,  Colton  was  determined  to  get  out  of  the  enterprises 
without  waiting  and  taking  her  chances  on  creating  a  mar- 
ket. Her  one-ninth  of  the  indebtedness  due  from  the  W, 
D.  Co.  to  Stanford,  Huntington,  Crocker  and  the  estate  of 
Hopkins,  amounted  to  over  $800,000,  If  defendants  had 
desired  to  take  any  advantage  of  plaintiff  their  opportu- 
nities were  unbounded.  If  they  had  simply  refused  to  pay 
her  any  money,  what  would  have  become  of  her?  They 
had  a  perfect  right  to  refuse  to  buy  her  out  or  furnish  her 
with  money  with  which  to  meet  her  outside  obligations. 
The  estate  was  indebted  to  defendants  to  the  extent  of 
three-quarters  of  a  million  of  dollars,  and  was  pres.sed  with 
claims  amounting  to  over  $175,000.  These  claims  could 
not  have  been  met  if  defendants  had  not  supplied  plaintiff 
with  money  to  pay  them.  They  paid  a  note  of  Colton  to 
Michael  Reese  which  alone  amounted  to  over  $75,000, 
From  October,  1878,  to  the  time  of  the  settlement  plaintiff 


—48- 


had  been  allowed  to  draw  about  $175,000  for  her  own  use, 
and  to  pay  off  the  debts  of  the  estate.  The  situation  of 
the  plaintiff  at  that  time  is  best  expressed  in  her  own  lan- 
guage. In  a  letter  to  Mr.  Hunt,  dated  JMay  8,  1879,  ^^^ 
says: 

"  Now,  I  have  managed  wonderfully  well.  Tlie  rail- 
road people  agreed  to  let  me  draw  for  my  household 
expenses,  *  ^^         ^^'  I  have  paid  a  note,  bearing 

interest  at  8  per  cent,  of  $25,000.  I  have  paid  a  note  on 
call  (no  interest)  in  Europe  of  $9,000.  I  have  paid 
$18,000  on  a  call  note  bearing  8  per  cent;  a  note  of 
$25,000,  held  by  the  National  Gold  Bank,  of  whom  David 
was  a  Director.  I  held  100  shares  of  this  bank  stock, 
and  I  sold  it  for  85  cents  to  the  bank,  so  I  still  owe  them 
$7,000,  which  I  am  paying  them  interest  on.  They  have 
treated  me  very  nicely,  but  I  wish  to  pay  them  as  soon  as 
possible.  Then  there  were  about  three  thousand  dollars 
of  bills  coming  in,  owing  on  our  country  place  for  labor 
and  lumber  for  improvements,  other  immediate  obligations 
of  a  sacred  nature  of  about  three  thousand  dollars.  Now 
we  have  cut  down  at  every  turn  and  corner.  *  *  * 
They  have  once  or  twice  asked  if  I  was  making  invest- 
ments, and  the  last  time  they  drew  they  declined  to  allow 
me  any  more  until  we  had  made  a  .settlement.  This  set- 
tlement I  am  anxious  to  make  and  am  waiting  their  moves. 
Now  you  will  see  that  I  am  not  idle.  I  have  had  a  hard 
struggle.  I  have  lain  awake  nights  wondering  how  I  was 
going  to  pay  a  note  coming  due.  I  do  not  believe  the 
railroad  people  will  settle  squarely  with  me.  I  am  afraid  I 
shall  have  trouble."      (Pp.  9,141-43.) 

"  I  talk  business  with  no  one  except  ni)-  lawyer.  I  have 
had  a  sale  of  thoroughbred  stock  from  the  farm.  I  ha\e 
sold  the  carriages  and  horses,  except  just  such  as  we  posi- 
tively needed;  I  will  send  you  a  catalogue.  While  I  have 
no  business  experience,  I  am  learning  that  I  have  good 
judgment  in  many  things,  and  when  I  depend  upon  myself 
I  do  far  better  than  when  I  depend  on  others."  (P.  9,- 
145.)  As  stated  before,  the  defendants  were  under  no 
obligations  to  purchase  from  the  plaintiff".  All  parties 
were  in  great  distress.  Plaintiff  was  in"  need  of  money; 
so  were  the  defendants.  If  defendants  had  desired  to  take 
an  unfair  advantage  of  Mrs.  Col  ton,  all  that  was  necessary 


-44- 


to  accomplish  their  aim  was  the  enforcement  of  their 
claims  against  the  estate.  No  purchaser  other  than  de- 
fendants for  the  securities  in  which  the  estate  was  inter- 
ested could  be  found.  Defendants  were  not  to  blame  for 
that  circumstance.  If  plaintiff  had  been  put  to  a  forced 
sale  and  defendants  had  seen  fit  to  take  advantage  of  their 
position,  and  had  purchased  the  interest  of  the  estate  at 
even  nominal  figures,  could  plaintifi^  have  complained, 
except  from  a  moral  standpoint  ?  Mr.  Tevis  was  a  man 
of  great  wealth,  familiar  with  railroad  matters,  and  the 
affairs  of  the  companies  in  which  the  parties  were  inter- 
ested. Defendants'  statements  as  to  values  were  mere 
matters  of  opinion,  and  they  were  so  understood  by  every- 
body concerned.  Mr.  Wilson  and  Mr.  Tevis  were  as  com- 
petent to  judge  as  to  the  value  of  the  securities  as  were 
the  defendants.  The  defendants  did  not  deny  that  the 
stocks  would  be  worth  more  in  the  future;  they  expressly 
so  declared.  They  had  confidence  in  their  own  ability 
and  the  eventual  success  of  their  enterprises,  but  plaintiff 
had  no  confidence  in  them  or  their  schemes.  It  is  the 
misfortune  of  the  plaintiff — not  the  fault  of  defendants — 
that  the  prospect  of  success  was  so  poor.  We  must  be 
careful  not  to  judge  a  transaction  of  this  kind  in  the  light 
of  subsequent  events.  There  is  a  natural  inclination  to 
do  so. 

It  must  be  remembered,  too,  that  Mrs.  Colton  was  not 
destitute  of  coercive  power.  Mr.  Tevis  told  defendants 
they  could  not  afford  to  have  litigation  with  plaintiff — the 
widow  of  their  old  associate;  that  it  would  be  prejudicial 
to  themselves  as  individuals  and  to  all  their  enterprises; 
that  she  would  have  the  sympathies  of  the  public,  etc. 
Staggering  as  they  were  under  heavy  burdens,  litigation 
meant  disaster.  Their  securities  would  be  injured,  and 
the  expense  of  a  protracted  trial  such  as  would  follow  a 
full  investigation  into  the  affairs  of  the  company  would 
seriously  cripple  them.  Concessions  had  to  be  made  on 
both  sides  or  ruin  would  fall  upon  both.  Concessions 
were  made,  and  they  were  honestly  and  fairly  made.  All 
parties  acted  upon  tlieir  best  information  as  to  the  amount 
and  character  of  the  property  in  controversy,  and  accord- 
ing to  their  best  judgment  as  to  the  value  thereof.  Mr. 
Colton  had  undertaken  to  carrv  a  burden  which    was  be- 


-45- 


yondhis  strength,  and  for  Mrs.  Colton  to  attempt  to  carry 
it  was  a  proposition  which  was  entirely  discarded  as  an 
impossibility  before  the  negotiations  began.  The  inability 
of  plaintiff  to  go  on  was  as  embarrassing  to  defendants  as 
it  was  to  her.  By  the  terms  of  the  compromise  plaintiff 
was  released  from  corporate  liabilities  amounting  to  mil- 
lions of  dollars. 

How  can  unfairness  or  inadequacy  be  predicated  upon 
such  conduct  and  such  facts  ?  The  statement  of  the  cir- 
cumstances is  sufficient,  /we  think,  to  demonstrate  the 
truth  and  justice  of  the  finding  of  the  Court  that  defen- 
dants were  guilty  of  neither  threats,  concealments,  nor  un- 
due exercise  of  a  superior  position  and  power,  but  that  the 
negotiations  which  culminated  in  the  contract  Exhibit  F 
were  fair,  just  and  equal. 

Other  points  are  made  by  appellant  which  we  do  not 
deem  necessary  to  consider  at  length.  It  is  said  that  the 
findings  do  not  cover  the  issues,  that  the  Court  adopted  an 
erroneous  theory  as  to  the  relation  of  the  parties — tried 
the  case  on  one  theory  and  decided  it  on  another  ;  drew 
erroneous  conclusions  of  law  from  the  facts  found,  proved 
and  admitted  ;  found  conclusions  of  law  where  facts  should 
have  been  stated  ;  that  the  evidence  is  insufficient  to  justify 
the  findings  of  the  Court  in  certain  particulars — the  most 
important  of  which  are,  the  evidence  shows,  that  INIr.  Wil- 
son was  not  an  independent  adviser  ;  that  Mr.  Tevis  was 
not  possessed  of  information  in  regard  to  the  affairs  of  the 
corporations  to  enable  him  to  give  reliable  advice  ;  that 
plaintiff  would  not  have  entered  into  the  contract  had  she 
known  the  truth  as  to  the  stock  ;  that  many  of  the  items 
set  forth  in  that  portion  of  Exhibit  D  after  the  heading 
therein,  "General  D.  D.  Colton  in  account  with  the  West- 
ern Development  Company,"  were  true  or  correct,  and 
that  Mr.  Wilson  was  not  informed  how  the  account  had 
been  made  up,  or  that  the  defendants  had  no  personal 
knowledge  of  the  correctness  thereof. 

Many  of  these  points  were  not  referred  to  on  the  argu- 
ment, and  most  of  them  are  apparently  abandoned  by  at 
least  a  majority  of  appellant's  counsel  in  this  Court. 
Nevertheless,  we  have  given  careful  attention  to  each  and 
all  of  the  points  made  in  all  the    briefs.     Some  of  those 


— 4H- 


last  referred  to  are  involved  in  the  qnestions  we  have  con- 
sidered at  length  in  this  opinion  ;  the  others,  we  think, 
are  without  merit. 

The  judgment  and  the  order  denying  a  new  trial  are 
affirmed.  Paterson,  J. 

We  concur  : 

McFarland,  J., 
Sharpstein,  J., 
Works,  J., 
Beatty,  C.J. 

Fox,  J.,  not  having  heard  the  argument,  and  Thornton, 
J.,  deeming  himself  disqualified,  did  not  participate  in  the 
decision. 


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